When Bitcoin was first launched in 2010, the initial price was set to just below a cent. Close to 8 years now, the crypto-coin which herald the use of Blockchain technology has seen a price gain of over 18,000% to a high of $19,000. The price of Bitcoin now stands at $7,000 after a more than 50% drop in just 3 months time. Other cryptocurrencies have joined the frenzy with all going through the same cycle.
Initially, cryptocurrency was viewed as a haven for the black market, drug dealers, and contract killers. However, fortunes have changed for the better with millions of dollars being poured into every new Blockchain application by numerous hedge funds and investors. Digital money and applications are going mainstream through various ICOs geared towards supporting the development and increase in value of the cryptocurrency.
More and more people have also shifted from viewing the cryptocurrency industry as based on Bitcoin. Rather, many now recognize the underlying blockchain technology from which various applications in Money transfer, health, social interaction and file storage among others can be based upon.
The increased interest has had governments chasing tails in terms of regulation as the technology is relatively new with no comparable industry to base regulation on. It led to a blanket sidelining of the conversation by the regulators with the hope that the mad frenzy would soon die out. Well, that did not work out well for them. The increased amount of money being poured into the over 1500 ICOs has now seen a renewed worry by regulators about the danger of small crypto projects facing liquidity issues and the use of cryptocurrency in the commission of crimes.
Governments are now catching up with regulations and plans to control exchanges and how money for the cryptocurrencies is raised.
Countries such as China have stated their intention to regulate the markets instead of an outright ban on the trade. Moreover, the country has also set up a Blockchain fund with $1.6 billion-30 percent of which is backed by the Hangzhou city government-. However, the country is also at the forefront of the battle against cryptocurrencies with plans to scrutinize individuals and businesses suspected to be facilitating overseas trade in bitcoin and other cryptocurrencies. This was after China banned all crypto-exchanges in September 2017 forcing citizens to trade their coins over the counter or through exchanges not based in China.
On the local front, CBK governor Patrick Njoroge issued a veiled warning on the dangers of investing in Bitcoin and other cryptocurrencies. “We warned everybody that this was a risky venture and the consumer is not protected,” Dr. Njoroge said. “It could very well be a Ponzi scheme of a kind, I think you have seen how the prices have gone up and down in various places.”
Similarly, companies such as Safaricom have in the recent past discouraged the trade in Bitcoin by cutting links with Lipisha and Bitpesa on the basis that both were going against the company’s Money laundering policy.
However, the tide seems to be slowly changing. Kenya’s ICT cabinet secretary has been at the forefront of these changes evidenced by the set up of a task force to oversee and identify possible uses of Blockchain technology in the country. This has opened up the conversation about possible regulations on the trade and issue of cryptocurrency in the country.
A bill passed in the Arizona Senate now allows the state to accept taxes in Bitcoin. The bill is currently in the house of representatives pending approval. Hurdles still exist in as far as cryptomarket regulation with reports signaling an ongoing probe on cryptocurrencies by the SEC. Although limited information on the probe exists, experts suggest that regulators may be looking into Initial coin offerings with a focus on companies that may not have adhered to securities laws when raising their funds.
South Korea is still undecided on whether or not to regulate the industry with Japans largest cryptocurrency groups coming together in an effort to self-regulate, improve security, increase legitimacy and prevent both insider trading and money laundering on the platform. The EU has issued tough talk on proposed regulation arguing for a separation Fintech regulations with rules that guide the operation of financial institutions and instruments such as banks and stocks respectively.
The future for cryptocurrencies definitely looks brighter. The fact that the discussion has moved from banning cryptocurrencies to regulating them is a single big step in increasing its usability and acceptance. It remains to be seen how far the regulations will go and if these regulations will be coordinated across jurisdictions for uniformity in the global industry.