Cryptocurrency And Its Law Regulations By Sani Michael Omakoji

Cryptocurrency does not operate in isolation thus, there are measures or regulations to guide its operations around the world.

In view of the above statement, our Financial Expert Columnist, Sani Michael Omakoji, tells us the legalities of cryptocurrency and its regulations around the world.

Let us read him;

“ The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them.

While some countries have explicitly allowed their use and trade, others have banned or restricted it.

According to the Library of Congress, an “absolute ban” on trading or using cryptocurrencies applies in eight countries to include: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates.

An “implicit ban” applies in another 15 countries, which also include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan.

In the United States and Canada, state and provincial securities regulators, coordinated through the North American Securities Administrators Association, are investigating “bitcoin scams” and ICOs in 40 jurisdictions.

Various government agencies, departments, and courts have classified bitcoin differently.

China Central Bank banned the handling of bitcoins by financial institutions in China in early 2014.

In Russia, though cryptocurrencies are legal, it is illegal to actually purchase goods with any currency other than the Russian ruble.
Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.

Cryptocurrencies are a potential tool to evade economic sanctions for example against Russia, Iran, or Venezuela.

In April 2018, Russian and Iranian economic representatives met to discuss how to bypass the global SWIFT system through decentralized blockchain technology.

Russia also secretly supported Venezuela with the creation of the petro (El Petro), a national cryptocurrency initiated by the Maduro government to obtain valuable oil revenues by circumventing US sanctions.

In August 2018, the Bank of Thailand announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC).

Advertising bans
Bitcoin and other cryptocurrency advertisements were temporarily banned on Facebook, Google, Twitter, Bing, Snapchat, LinkedIn and MailChimp.

Chinese internet platforms Baidu, Tencent, and Weibo have also prohibited bitcoin advertisements.

The Japanese platform Line and the Russian platform Yandex have similar prohibitions.

On 25 March 2014, the United States Internal Revenue Service (IRS) ruled that bitcoin will be treated as property for tax purposes.

This means bitcoin will be subject to capital gains tax.

In a paper published by researchers from Oxford and Warwick, it was shown that bitcoin has some characteristics more like the precious metals market than traditional currencies, hence in agreement with the IRS decision even if based on different reasons.

Now, I, sani Michael Omakoji, the author of this article urge you to pay attention to this.

‘As the popularity of and demand for online currencies has increased since the inception of bitcoin in 2009, so have concerns that such an unregulated person to person global economy that cryptocurrencies offer may become a threat to society.

Concerns abound that altcoins may become tools for anonymous web criminals.

Cryptocurrency networks display a lack of regulation that has been criticized as enabling criminals who seek to evade taxes and launder money.

Transactions that occur through the use and exchange of these altcoins are independent from formal banking systems, and therefore can make tax evasion simpler for individuals.

Since charting taxable income is based upon what a recipient reports to the revenue service, it becomes extremely difficult to account for transactions made using existing cryptocurrencies, a mode of exchange that is complex and difficult to track.

Systems of anonymity that most cryptocurrencies offer can also serve as a simpler means to launder money.

Rather than laundering money through an intricate net of financial actors and offshore bank accounts, laundering money through altcoins can be achieved through anonymous transactions.’

Loss, theft, and fraud in cryptocurrency.
In February 2014 the world’s largest bitcoin exchange, Mt. Gox, declared bankruptcy.

The company stated that it had lost nearly $473 million of their customers’ bitcoins likely due to theft.

This was equivalent to approximately 750,000 bitcoins, or about 7% of all the bitcoins in existence.

The price of a bitcoin fell from a high of about $1,160 in December to under $400 in February.

Two members of the Silk Road Task Force—a multi-agency federal task force that carried out the U.S. investigation of Silk Road—seized bitcoins for their own use in the course of the investigation.

DEA agent Carl Mark Force IV, who attempted to extort Silk Road founder Ross Ulbricht (“Dread Pirate Roberts”), pleaded guilty to money laundering, obstruction of justice, and extortion under colour of official right, and was sentenced to 6.5 years in federal prison.

U.S. Secret Service agent Shaun Bridges pleaded guilty to crimes relating to his diversion of $800,000 worth of bitcoins to his personal account during the investigation, and also separately pleaded guilty to money laundering in connection with another cryptocurrency theft; he was sentenced to nearly eight years in federal prison.

Homero Josh Garza, who founded the cryptocurrency startups GAW Miners and ZenMiner in 2014, acknowledged in a plea agreement that the companies were part of a pyramid scheme, and pleaded guilty to wire fraud in 2015.

The U.S. Securities and Exchange Commission separately brought a civil enforcement action against Garza, who was eventually ordered to pay a judgment of $9.1 million plus $700,000 in interest.

The SEC’s complaint stated that Garza, through his companies, had fraudulently sold “investment contracts representing shares in the profits they claimed would be generated” from mining.

On 21 November 2017, the Tether cryptocurrency announced they were hacked, losing $31 million in USDT from their primary wallet.

The company has ‘tagged’ the stolen currency, hoping to ‘lock’ them in the hacker’s wallet (making them unspendable).

Tether indicates that it is building a new core for its primary wallet in response to the attack in order to prevent the stolen coins from being used.

In May 2018, Bitcoin Gold (and two other cryptocurrencies) were hit by a successful 51% hashing attack by an unknown actor, in which exchanges lost estimated $18m.[citation needed]

In June 2018, Korean exchange Coinrail was hacked, losing US$37 million worth of altcoin.

Fear surrounding the hack was blamed for a $42 billion cryptocurrency market selloff.

On 9 July 2018 the exchange Bancor had $23.5 million in cryptocurrency stolen.

The French regulator Autorité des marchés financiers (AMF) lists 15 websites of companies that solicit investment in cryptocurrency without being authorised to do so in France.

Google to verify this fact as time and space will not permit me to list them here.

Before I bid cryptocurrency good bye, it will serious oversight not to tell what is “Darknet markets” ?

Now read, ‘properties of cryptocurrencies gave them popularity in applications such as a safe haven in banking crises and means of payment, which also led to the cryptocurrency use in controversial settings in the form of online black markets, such as Silk Road.

The original Silk Road was shut down in October 2013 and there have been two more versions in use since then.

In the year following the initial shutdown of Silk Road, the number of prominent dark markets increased from four to twelve, while the amount of drug listings increased from 18,000 to 32,000.

Therefore, we can say that “Darknet markets” present challenges in regard to legality.

Bitcoins and other forms of cryptocurrency used in dark markets are not clearly or legally classified in almost all parts of the world.

In the U.S., bitcoins are labelled as “virtual assets”.

This type of ambiguous classification puts pressure on law enforcement agencies around the world to adapt to the shifting drug trade of dark markets.”

Congratulations to you if you actually read all the articles I wrote on cryptocurrency as you will no longer act as a novice any time you hear of the word cryptocurrency henceforth.

Sani Michael Omakoji
Financial Expert Columnist
Abuja – Nigeria
Contact: omakogibizventures@gmail.com