Over time the monetary system of the United States, as well as the world in general, has evolved. What may have started out thousands of years ago as a bartering system changed into what we use today.
In between then and now, coins and paper money became an accepted form of payment. Of course, those forms of money are still used to this day. In addition we have seen the rise of credit cards, chip cards, and electronic payments including cryptocurrency.
But as cryptocurrency has increased in use and popularity it has caused some challenges. Cryptocurrency needs to be regulated because of these challenges.
1. Stabilize Values
To help stabilize its value, cryptocurrency needs to be regulated. So far it has experienced wild swings in its worth, particularly in the past few months.
Those crazy increases in value, followed by sudden drops, have happened while gold values remain fairly steady. Obviously those large gains make investors happy but at the same time some may be nervous.
Buying or trading cryptocurrency when values rise could cause huge losses when their values later take a dive. Regulating cryptocurrency could stabilize values and end those extreme changes.
2. Eliminate Fears
An additional reason cryptocurrency needs to be regulated is simply to eliminate or at least reduce fears about it.
Due to the use of blockchain encryption technology in cryptocurrency transactions, a certain amount of self-regulation is already in place. Since banks aren’t required for transactions and theft is difficult, regulation in some of these areas is less necessary.
Nevertheless, thefts of digital money have happened and there are still fears about the use of cryptocurrency. Therefore, further regulation could ease those fears by stabilizing values, as pointed out earlier.
But possibly some of these fears stem from a lack of understanding about cryptocurrency in general. Regulating it may help in this area as well.
With regulation may come more widespread use and acceptance. In turn, greater acceptance reduces fears and increases understanding.
3. Ease Tax Issues
Currently, the IRS does not treat cryptocurrency as if it were money. Instead the current classification is that of an asset. If you keep cryptocurrency as an investment, capital gains and losses must be reported.
But there are other issues when it comes to taxes as well. That is another of the reasons cryptocurrency needs to be regulated.
One example is companies have used cryptocurrency as a means to evade taxes since it isn’t classified as money. Certainly the IRS is trying to crack down on this type of tax abuse. But catching all criminal activity is a difficult task.
Another example of tax problems is the individual who wishes to use cryptocurrency like cash instead of an investment. In the case of using it as a casual replacement for cash it becomes difficult to track.
Even so, the smallest transaction is still considered a tax gain or loss and must be reported. The result is that if you have a large amount of these transactions, each one has to be reported.
As you can see, there are still problems with cryptocurrency that need to be worked out. Although it is already becoming more widely used, there are reasons cryptocurrency needs to be regulated.
Do you think cryptocurrency needs to be regulated?
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Author: Kayla Sloan