I'm a cryptocurrency newbie and have very basic/dumb questions about regulation. Here goes..
1) What does regulation mean in practice? Is it like they want to register people who invest or something? Is it all about taxes?
2) Why does governments want to regulate crypto?
3) I see "securities" a lot when googling regulation. Are only coins/tokens that governments deem to be securities in danger of regulation?
4) What are the drawbacks (& advantages?) for an investor who discovers his/her crypto investment is to be regulated?
Thank you for your time & patience
1) What does regulation mean in practice? Is it like they want to register people who invest or something? Is it all about taxes?
2) Why does governments want to regulate crypto?
3) I see "securities" a lot when googling regulation. Are only coins/tokens that governments deem to be securities in danger of regulation?
4) What are the drawbacks (& advantages?) for an investor who discovers his/her crypto investment is to be regulated?
Thank you for your time & patience
1) Regulation just refers to a legal regime for dealing with cryptocurrencies. No legal frameworks until very recently were formed with Bitcoin in mind. Accordingly, governments need new legal frameworks and rules to deal specifically with cryptocurrencies. It's partly about taxes. It's also about cross-border commerce and sanctions, anonymity/pseudonymity and propensity for use in money laundering and other crimes, consumer protection from scams and fraudulent securities.
2) For the reasons listed above. If cryptocurrencies continue to grow at this rate, they will become economically relevant, with real repercussions on government tax revenue and commerce.
3) No, it's pretty clear that governments intend to regulate both cryptocurrencies and related tokens that are deemed securities. The distinction is just about jurisdiction. Eg. the SEC regulates securities.
4) From the casual investor/end user side, regulation means you need to be wary of projects that aren't in compliance. If an ICO is offering tokens to US investors which are clearly unregistered securities, that is a red flag. The SEC could take action against these ICO operators.