Cathy Mulligan, co-director of Imperial College London’s Center for Cryptocurrency Research and Engineering, stated that the lack of regulatory frameworks for Bitcoin and cryptocurrencies are holding back Bitcoin startups in many regions.
India is a prime example of Mulligan’s concern with insufficient and impractical regulatory frameworks. Startups, exchanges and trading platforms in India are currently self-regulating themselves with strict Anti-Money Laundering (AML) and Know Your Customer (KYC) policies due to the lack of regulations and clarity in the country.
Although Indian regulators confirmed with local publications that the legality of Bitcoin will be decided by May 20, 2017, for years, Indian Bitcoin exchanges and companies were not able to achieve their full potential. They target the country’s general consumer base due to the government’s unclear regulations toward Bitcoin and cryptocurrencies.
Mulligan explained that startups in the UK are experiencing the same issues as companies in India. Startups are requesting clarity on regulations for Bitcoin and Blockchain development but the country’s regulators are yet to provide clear regulatory frameworks for the Bitcoin and Blockchain industries to grow.
“We have the situation in the UK where many startups are chasing the regulator to say, ‘How are we going to be regulated?’ Bitcoin in the UK is really treated as private money. If you tried to exchange Bitcoin for sterling you don’t get charged VAT on the value of the Bitcoin but it is charged on, for example, the commission instead. From the UK perspective, we haven’t seen huge amounts of regulation,” said Mulligan.
Unlike other regions such as the US and China, Bitcoin exchanges and trading platforms are not required by the UK law to establish AML and KYC systems. However, the majority of exchanges do have strict AML and KYC systems in place to avoid similar issues OKCoin and Huobi suffered in China.
When the Chinese government rolled out its AML and KYC regulations on Bitcoin exchanges, Huobi and OKCoin were required to halt their services until they comply to the newly drafted regulatory frameworks.
“They aren’t being forced to have AML or ‘know your customer’ regulation just yet. I think what will happen in Japan is, there will be an influx in startups because the business environment is stable and you’ll know how you’re going to regulate it,” added Mulligan.
In order for Bitcoin to achieve wide mainstream adoption as the digital currency, governments must approve it as legal tender and enforce practical regulations for the industry to develop.
The Japanese and Philippine governments introduced official regulatory frameworks on Bitcoin after recognizing it as legal tender and payment method. Such clarity in the legality of Bitcoin allowed the Bitcoin industries in Japan and Philippines to experience a rapid rate of growth.
Eitan Jankelewitz, an attorney at Blockchain and cryptocurrency-focused law firm Sheridans, explained that Bitcoin hasn’t demonstrated its full potential as a digital cash system and currency. For Bitcoin to achieve complete mainstream adoption, Jankelewitz reaffirmed that efficient regulatory frameworks must be introduced.
“The brutal truth is that as a currency in the UK, and perhaps globally, it hasn’t taken off. People generally buy it because they think it’s going to increase in value in the long term or they just like the volatility and they decide they are going to trade it the same way you trade gold. It’s another currency, but there’s no burning need for it.”
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