Crypto-currencies have been making headlines breaking record after record. But on Monday an unprecedented clampdown by the People’s Bank of China saw the market capitalization of crypto-currencies fall. But it has since recovered somewhat.
The crypto market has long been accused of being shrouded in secrecy with many pushing for it to come under proper regulatory scrutiny. At the same time there has also been a rising trend of new initial coin offerings (ICOs). The growth in ICOs has been mushrooming of late and many have been deemed to have inadequate underlying technologies.
So what exactly does the PRBC aim to do? For starters it has deemed ICOs illegal and banned all fundraising activity. According to Bloomberg ICOs are the sale of tokens based on the blockchain which is the underlying technology behind bitcoin. Till date ICOs have managed to rake in roughly $1.25 billion but the move by China’s central bank is surely going to put a dent going forward.
The PBOC also forbade digital token financing and trading platforms from converting coins into fiat currencies such as against the dollar or yen. It has deemed digital token to be unfit for use as a currency on the market and has prohibited banks from providing services to ICOs in its recent ruling.
Meanwhile, back home the Federal Board of Revenue (FBR) is also intent on bringing crypto-currency trading under its purview. It has been investigating cases where it believes local investors to be trading digital currencies for money laundering and tax evasion purposes. This is an accusation that has been leveled at virtual currencies since its inception.
But while this is certainly true to an extent, many believe that the transaction mechanisms the world relies on have run their course and crypto-currencies are the future.
Times certainly have changed and countries including America, Canada, and Japan all have allowed transactions through Bitcoin. In April Japan officially recognised Bitcoin as legal currency with many businesses accepting it as a payment method.
By their very nature it is extremely difficult to track ownership of digital currencies. So it is easier said than done when it comes to regulating them. It remains to be seen how the FBR and SBP will tackle the issue. The approach should ideally maintain the balance between embracing a revolutionary technology while at the same time preventing its abuse for tax evasion purposes.
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