Is There Hope for Legalizing Cryptocurrency?
Digital currency has gained recognition over the years. This is since Bitcoin and blockchain hit the limelight back in 2009. Even so, evolution has betided this world and quite fast. On the contrary people have adopted this currency for various applications at a rather slow pace. Government and policymakers for instance are still skeptical about legalizing it.
Surprisingly, these same policymakers have taken a keen interest in blockchain, the technology behind digital currency transactions. Notably, cryptocurrency has witnessed a growing demand over time. Currently, 2% of the world’s population is actively using it with Bitcoin dominating the space by 58%. Some factors have however contributed to its somewhat slow adoption as we shall see below.
1. The Price Factor
Price is equal to value. The price of any cryptocurrency is expressed as its rate of exchange with other currencies mostly the dollar. Factors like media and government regulation affect price more than others. For instance, when Japan legalized Bitcoin as a mode of payment in April 2017, its price rose to $1,133.
Conversely, harsh regulations reduce how well cryptocurrency is valued hence affecting price negatively. A good example is Venezuela’s determination to arrest Bitcoin miners. Still, more countries are coming up with a legal framework for virtual currency. This presents an advantage as far as legalization is concerned.
2. A Highly Volatile Asset Class
Since their inception, volatility is by far one factor that has consistently affected all cryptocurrencies. For instance Bitcoin price passed the 19,000$ mark mid December 2017. The start of 2018 saw its decline to a bit past the $ 13,000 mark. By the end of March 2018, this price further declined to $ 6,928.85 representing a 48% decline during the first quarter. Nothing like this was ever witnessed after its 2013 decline.
Meanwhile Ethereum performed more or less the same as Bitcoin with a 47.7% decline during the same period. Ripple too saw its worst with 77% decline in the first quarter of 2018. Amazingly, the previous year had it witness a favorable outcome with 36% overall increase. Regulators are yet to witness a stable digital currency. This explains why they might be treading carefully on cryptocurrency grounds.
3. Day to Day Applications
The legality issues surrounding digital currency are delicate. Some investigation into the uses of cryptocurrency reveals that investors form the highest percentage. In essence, existing users mostly rely on virtual currency to gain from its expected rising value. The second common use of cryptocurrency is its use as a medium of exchange. Thirdly, users use virtual currency as a mode of payment. The number of merchants accepting Bitcoin as payment for goods or services has witnessed a remarkable increase.
On the con, digital currency has largely been associated with crimes like money laundering, terrorism funding and tax evasion. This is due to lack of a centralized control. However, with international regulators intervening on control and operational matters, there is renewed hope for a positive future.
3 Factors For Legalizing Cryptocurrency Conclusion
Cryptocurrency is here to stay. Although slow, the adoption rate seems promising. This mostly applies to regulators that have permitted its use in their jurisdictions. Others have left a grey area in laying down regulations hence not necessarily outlawing Bitcoin trade. Yet, if being used for illegal activities, the law of the land will apply.
It may take some time before digital and fiat currencies operate on a level playing field. However given the current trends and interest in the blockchain technology, legalization is not out of sight. Most importantly, there is need for international regulators to look into cryptocurrency as a whole. This is because some governments may never give this great innovation the nod.