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The relationship between digital currencies, global financial markets and government laws

The relationship between digital currencies, global financial markets and government laws

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Answer The relationship between digital currencies, global financial markets and government laws

Over the past few years, the digital and cryptocurrency market has grown exponentially day after day until its size reached nearly a trillion dollars in a period of time, which is a very huge number, and many still believe that the market will exceed this number in the future.

Let’s go back to 2009

Bitcoin is likely that it was a technical movement that its designer did not expect to reach what it has reached now, but as a result of the innovation of the encryption system (Blockchain) it became easier than before and the confidence of traders in currencies is greater than before, the success of Bitcoin led to the existence of 1400 other currencies similar to it and helped create nearly a million new jobs around the world.

Read:Binance successfully stops a scammer on its platform

Experts consider that Bitcoin has brought good and bad to the financial markets in general, as it created a strong competition system that did not exist previously in the financial markets, and also helped to say with confidence that the scientific theories and intellectual theses that talk about a virtual currency that will be able to enter the trading markets were correct and not From the imagination, what is also bad is the lack of a clear legal system that cryptocurrencies have access to and also it has raised many problems including money laundering or tax evasion for example.

The difference between cryptocurrency and money

The term money and cryptocurrencies have no convergence or synonymy at all. Contrary to what some believe, cryptocurrencies are one of the branches of virtual currencies, and although no real definition of money has been established, in order to call anything describing money, it must have 3 main characteristics, which are :
To have a unit of account.
Can be exchanged with other currencies.
A measure of values ​​and a store of value.

On the previous scale, Bitcoin, due to its price fluctuations, cannot be considered a store of value, and the mechanism for considering it as a unit of account is a fantasy.

Read:MicroStrategy Flying Out and Buying More Bitcoin Worth $94.2 Million

The relationship between monetary policy and cryptocurrency

Monetary policy is built on controlling central banks and determining the amount of money offered, by which interest rates and the amount of bank reserves are adjusted, as well as buying or selling government bonds. The difference here is that these banks cannot control even 1% of foreign currencies. Examples of this are:

  • The US central bank controls only the US dollar.
  • The Saudi Central Bank controls only the Saudi riyal.
  • The Central Bank of Egypt can only issue directives to the Egyptian pound.

With regard to cryptocurrencies, the matter is deeper than that, as it enters the depth of countries, banks and trading platforms, and therefore central banks cannot control them in any way, and there is a fixed protocol to regulate transactions, but it cannot control or refrain from them.

The real fear that can occur is that the increase in demand for cryptocurrencies will affect the amount of money that is dealt with, which could cause a recession in global markets.
(Imagine if bitcoins were bought in larger quantities and dollars sold more often, of course bitcoin would rebound and the dollar would go into the unknown)
In this case, the roles of central banks will be weaker and less, and there will be a dispersal of the global currency, as each continent or group of countries can define a specific currency to trade among themselves and dispense with the dollar significantly.
All of these reasons will make national banks the ones who will start creating government platforms for issuing and trading cryptocurrencies, and will even go beyond all that as central banks will create their own currency based on the blockchain system with all the conditions to become a currency such as finding an account unit and converting it to be A store of value.

Read:Crypto exchange Zipmex meets with the Securities Commission of Thailand to discuss its recovery plan

Government laws

Of course, the laws differ from one country to another, but it is worth noting that the ruling regimes have the same data and also have the same ideas and ideology, and therefore we will take the United States as an example that explains to us how the situation is in a simple way.
The United States of America to this day has not fulfilled its constitutional duties to regulate cryptocurrency policy and this means that traders and the miners community are free to do their business as they see fit, of course there are some states that have called for an end to the trading of cryptocurrencies such as Arizona, Vermont and Delaware, but they are considered individual actions not more.

Global Bulletin of Virtual Business Law (USL)

This regulation has been prepared to work out to understand the trading of cryptocurrencies and it will be the beginning of a document for the regulation of trading that we will see in the coming years.
The USL is a gathering of legal experts, lawyers, judges, and legislators, who are employed by the courts to implement proposed legal amendments and to establish rules and regulations for economic transactions.
This organization seeks to create a unified legal structure that aims to standardize cryptocurrency systems around the world. This institution limits the activity of digital currencies within the following form:

1- Transfer of funds from one person to another.
2- The exchange of digital currencies with platforms or by deposits or other investment activities.
3- Assets under the control of banks and some types of credit portfolios.

And all of that, in the end, it is a draft and not a mandatory governing document.

Anti-money laundering systems

The simplest description of money laundering is to convert money of notorious origin into clean money of legal source, money laundering is done by realizing 3 steps:
Selection.
Planning.
-integration.
According to security organizations, cryptocurrencies are widely used in money laundering operations, and it is noteworthy that the past year witnessed the leadership of Bitcoin on the throne of currencies through which drugs, weapons and all prohibited items are purchased.
We all know that criminals and hackers are people with good mental capabilities and extensive technical expertise and therefore their knowledge was used by them to enter the platforms with anonymous devices and carry out campaigns to weaken networks in devious ways, and despite all these utilities, money laundering was not an easy thing Absolutely, and there are other ways to launder money through casinos, casinos, currency trading companies and others.

Taxes, crypto and digital currencies

One of the issues in understanding digital currencies is the tax system. The United States, for example, issued a statement explaining how cryptocurrencies will be subject to tax-paying properties.
According to the IRS, the amount in which a currency is traded is its market value and therefore must be accounted for on a regular basis.
The Tax Authority specified that this will be done after calculating profits only, and the Tax Authority requires users to put the value of the work when buying it, calculate its profits afterwards, and determine the annual tax imposed on it.
But the rejection coming from the cryptocurrency community was apparently stronger, as they said that the law imposes taxes on monetary transactions, but does not impose any tax in the case of commercial trading, and an example of this:
If you sell a property for money, the state will get a tax return from both parties, but if you exchange the same property for another property, the state will not get any taxes at all.
This is exactly what happens in cryptocurrency trading, but the US government has changed this law and limited it to real estate property only.
Apparently, all these points will be reset and special laws will be established for them.


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