Tokens: The Type of Digital Currency
To begin, cryptocurrencies must be differentiated from cryptographic "tokens," which have a purpose other than and even beyond serving as a general-purpose means of exchange. They are a modern form of crypto-asset (a digital asset registered on a shared database and shielded by cryptography that reflects a claim against an individual (or against its cash flows, properties, residual value, potential products or services) resulting through the usage of blockchain technologies.
Other tokens are usually referred to as "utility tokens" because they give their purchasers (future) access to specific products and services. They may be used to purchase specific goods or services, but they are not a general-purpose trade since they are usually only usable on the token network. Find all the advantages of bitcoin payments.
Cryptocurrencies And Crypto Securities:
Second, cryptocurrencies can be differentiated from a term known as "cryptosecurities" that has recently gained popularity. In a nutshell, it has been suggested that blockchain technologies be used to record, issue, and pass common shares and other corporate stocks, meaning that a company's cost of a capital table is still correct up-to-date. 77 Since this technical process will be protected by cryptography; crypto securities have been proposed as a category for these securities. The only thing that connects this modern idea of "cryptosecurities" to cryptocurrencies is that they all use blockchain technologies.
Blockchain And Cryptocurrencies:
In the last couple of years, cryptocurrencies, as well as blockchain, have become buzzwords. Even though the two are frequently used in the same paragraph and are related, one should never confuse the two. It is also the technology that underpins the wide range of cryptocurrencies presently in use. It's critical to distinguish between these apps and virtual currencies, just one type of blockchain application. Considering this, regulators do not have to be concerned about suffocating innovation regarding cryptocurrency regulation.
Who Are the Participants In This Scenario?
The financial system is a new stage on which various players each have their role to play. To provide additional insight into how the market operates, and without trying to be comprehensive, we will define the critical players in the following sections.
Users of Cryptocurrencies:
The "digital currency user" is the first and most important player. A cryptocurrency user is indeed a moral agent or legal entity that obtains coins for both the purpose of purchasing real or virtual items and services (from a select group of merchants), (ii) making peer-to-peer payments, as well as (iii) holding them for productive investments (i.e in a speculative manner)
The anonymity of nearby cryptocurrencies is a key issue that needs to be addressed throughout the fight against corruption, financial fraud, and tax evasion using cryptocurrencies.
- The current European legal framework is ineffective in dealing with this problem.
- The tide is turning: the fifth revised version of the money laundering and terrorist financing directive includes the definition of financial instruments and topics virtual currency services and payment services providers to a client due to diligence requirements as well as the obligation to report suspicious transactions with economic planning units.
- The scope of AMLD5 excludes several important players in the cryptocurrency markets, leaving gaps in the fight against corruption, terrorist financing, and tax evasion.
- No instant action is taken in regards to exposing the anonymity of users in general. The Commission will evaluate a system with voluntary registration with users only in its next transnational risk assessment. To reveal cryptocurrency consumers' privacy, a required registration with a pre-determined deadline will be a safer solution.
- A moratorium should be proposed on some elements of certain cryptocurrencies.
- Addressing tax evasion, terrorist finance, and tax avoidance using cryptocurrencies is important at the European level. Still, it is even more relevant globally since the European frontier does not restrict crypto activity.
- Blockchain is a system that underpins a significant range of cryptocurrencies, but it is not meant to be used for money trafficking, extremist funding, or tax evasion. The war against money trafficking, terrorism funding, and transfer pricing should concentrate on the illegal usage of cryptocurrencies rather than blockchain technologies.
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