Regulations for cryptocurrencies from governments will be very much in place soon. China announced just yesterday that they will have tighter measures to protect the financial system hence in their statement, they mentioned that it is necessary to “crack down on Bitcoin mining and trading behaviour, and resolutely prevent the transmission of individual risks to the social field.”
China
So I am sure you know what happened next, here we go again....Bitcoin tumbled and fell. It was only just recovering and now with this news, more selling is set to happen. I think there are quite a few factors involved in this. China has all along been in the process of creating their own digital yuan yet according to the Cambridge Centre for Alternative Finance, roughly 70% of the hashrate for mining Bitcoin—that is, the processing power for verifying transactions on the blockchain’s ledger—is generated in China. Hence, it is quite ironic and with the government. With some banks in China like China Citic Bank barring customers from trading Bitcoin using their bank account, lots more regulation is going to be rolled out as China is aiming to reduce carbon dioxide emissions by at least 65 per cent by 2030, relative to 2005 levels, and then achieve carbon neutrality by 2060.
United States of America
The US Treasury is also rolling out stricter rules for cryptocurrency compliance where any transfer worth more than $10,000 needs to be reported to the Internal Revenue Service (IRS). This is definitely a huge step, if individuals who bought Bitcoin earlier on, their holdings would definitely be worth much more than $10,000 and with each transfer of >$10,000, they will need to report it to the IRS to ensure taxes are paid.
I am not surprised by US move to have more regulations for cryptocurrencies as the recent Colonial Pipeline hack which was caused by a cyberattack and the company had to shut down approximately 5,500 miles of pipeline in the United States, crippling gas delivery systems in Southeastern states, Joe Biden had to declare a state of emergency and Joseph Blount, CEO of Colonial Pipeline paid the ransom to DarkSide which was 75 BTC payment (approximately $4.4 million at the time of the transaction). It was later discovered that DarkSide, the hacker group behind the Colonial ransomware attack, received $90 million in bitcoin ransom payments from 47 victims. It is huge, although the wallets were traceable and funds were drained from it where there were speculation that this bitcoin had been seized by the U.S. government although no one can be sure of it, this definitely further enforced the need for regulation of cryptocurrencies to the US government. Joe Biden has also signed an executive order to strengthen US cybersecurity defences after the Colonial Pipeline hack.
Thoughts on more regulation
The governments would definitely wish to regulate cryptocurrencies as the volatility it has brought about in 2020 and 2021 is worrying for them. The run-up of Bitcoin and cryptocurrencies has brought about attention to it as it sparks concerns of market manipulation and uninformed retail investments. However, I definitely think there are ways to avoid the regulations but we will have to see how the regulations advance from here. In the meantime, I will hold on to my holdings of both BTC and ETH while continuing to DCA with a small amount that I have monthly. I do not hold such a substantial amount of cryptocurrencies (So I guess I won't be a millionaire anytime soon 😉) as the volatility is really 10X of the stock market as it reacts fast to news. As of now (22 May, 8.53am SGT), BTC is at a price of USD37,645.95 and ETH at USD2,449.00. Both looking rather attractive. 💎 🙌
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References:
-https://www.cnbc.com/2021/05/21/bitcoin-falls-after-china-calls-for-crackdown-on-bitcoin-mining-and-trading-behavior.html?utm_content=Main&utm_medium=Social&utm_source=Facebook&fbclid=IwAR23-PUM0QYttE1gKoE2mALKaks4CVBPxMeEmTlREgQvfjfbN69XWpyOFRQ#Echobox=1621608479
-https://www.cnbc.com/2021/05/20/us-treasury-calls-for-stricter-cryptocurrency-compliance-with-irs.html
-https://fortune.com/2021/05/02/bitcoin-mining-hashrate-china-inner-mongolia-ban/
-https://www.cnbc.com/2021/05/18/colonial-pipeline-hackers-darkside-received-90-million-in-bitcoin.html
-https://www.scmp.com/economy/china-economy/article/3134058/chinas-cryptocurrency-crackdown-sees-inner-mongolia-call