Since the advent of crypto-currency, the most notable of which is Bitcoin, the fast-paced international flow of cash has only become more rapid. On top of that, it’s also become more secure, and more stable; investing in the variety of crypto-currencies on the market has proven to be exceedingly rewarding and investments are through the roof. But, with the transfer and flow of money of course comes regulation in order to prevent illicit activities including money laundering, drug trafficking, and fraud. Read more about cryptocurrency with our team of top lawyers in Dubai in our article Bitcoins: Decrypting the Currency – Laws and Regulation.
Firstly, it is important to understand what cryptocurrency is, before understanding the regulatory framework surrounding it. Crypto-currency is a currency like no other – it is not minted by any government authority, and runs entirely electronically. Rather, the currency is generated through a process known as “mining.” Mining a cryptocurrency involves one simple process: a computer solving a highly complex algorithm. This simple process requires incredibly powerful computers. In other words, this money-making machine is a rather large capital investment.
Unlike money in your bank account, Bitcoins are not tied to your name, giving Bitcoin users a sense of anonymity. However, all Bitcoin transactions are publically tied to that particular Bitcoin. That is to say, while it is not tied to an individual in particular, the public is aware how many times a particular Bitcoin has passed hands, and is given access to all the Bitcoin addresses associated with a particular Bitcoin. Therefore, anonymity when it comes to Bitcoin is a bit fickle. Anyone with enough time and dedication could compile a database which is capable of comparing which Bitcoin addresses are frequently transferring or being transferred Bitcoins, from which other Bitcoin addresses. Quite quickly, you would be able to get an idea for which kinds of addresses are dealing with which sorts of addresses, and their frequency. The illusion of anonymity would be quickly shattered.
Nevertheless, regulating the use and transfer of money which is not directly associated with any person or entity which can be easily pinpointed presents its own set of problems, which different jurisdictions choose to handle according to the sophistication of their legal systems, their ability to adapt to with the current legal climate, and their ability to stay on top of the quickly-evolving technological scene. Countries who aren’t able to keep up to date on cyber security and cyber crime are quickly finding themselves lost amid a world of cyber attacks, illicit activity, and the whole underworld surrounding these cryptocurrencies.