All countries are looking towards tightening regulations around cryptocurrency. This sudden trigger is due to the recent theft of roughly ¥58 billion worth of cryptocurrency holdings from a Tokyo-based virtual currency exchange.
Japan took a major step last year when it revised its Payment Services Act and legally defined cryptocurrencies as a means of financial settlement, requiring virtual currency exchanges to register with the government and submit annual reports. Now Japan has 16 registered cryptocurrency exchanges which makes it a major player in the field.
China and South Korea have also tightened their regulations on cryptocurrencies, and Germany and France are reportedly prepared to propose and discuss new international regulations at the Group of 20 meeting of finance ministers and central bank chiefs in March this year.
Regulations on virtual currencies should be framed keeping in mind that although problems have been exposed these regulations will have an impact on crypto’s future potential to radically change financial services.
The overheating of the cryptocurrency market with speculative money and the wild price fluctuations have raised alarms and calls for tightening of regulations in many countries from the viewpoint of financial system stability. Aside from the instability of cryptocurrency prices, a concern is growing particularly in Europe that virtual currencies could be used in money laundering and funding for terrorist activities.
The initial intended purpose of cryptocurrencies was their use as a reliable tool in financial payment. Since speculative transactions may be unavoidable it is necessary to have tighter market regulations At the same time, care should be taken so that excessive regulations will not result in stifling the potential of cryptocurrencies to enhance the convenience in financial services.