Should the U.S regulate the use of cryptocurrencies?

The rise of cryptocurrency has led to things like the WannaCry ransomware attack that occurred in May 2017, demanding Bitcoins from users if they wanted their encrypted data back. More than 300,000 computers were affected. According to Cyence, a cyber risk firm, the attack caused a total loss of $4 billion in over 150 countries. Similar schemes led to the loss of $1.5 billion last year according to the risk firm.

The losses occurred due to the presence of cryptocurrency such as Bitcoin, which can be transferred from one user to another anonymously -- making it difficult to track those that are engaging in such activities.

Customer losses in the past

In February 2014, Mt. Gox filed for bankruptcy protection from its creditors. Before going down, the company handled over 70 percent of bitcoin transactions globally. Its downfall was blamed on the loss of 850,000 bitcoins that were worth $450 million.

On August 8 last year, CNN reported that hackers stole 119,756 bitcoins from a Hong Kong-based Bitcoin exchange site.

The site halted trading, withdrawals, and deposits, thus causing Bitcoin price to fall by 20%.

Last week, hackers stole 13,000 bitcoins from a South Korean cryptocurrency exchange site. It is still not known whether U.S customers were affected.

How cryptocurrencies might be regulated

The U.S will create an oversite authority within the securities exchange commission (SEC). This authority will approve Cryptocurrencies and exchange site that want to operate in the U.S. Fines for malpractices by the exchange sites will be set as well as compensation procedures in case customers experience losses of their fund due to incidences such as hacking. The introduction of a new cryptocurrency and the setting up of an exchange site by a U.S investor within the U.S will also need approval from the authority.

Investors will also be required to have the minimum capital when setting up their cryptocurrency businesses. Strict security requirements for their I.T infrastructure will also be set.

Hurdles when regulating cryptocurrencies

Cryptocurrency is used worldwide, and nothing bars people from using cryptocurrency that originates from another country. Cryptocurrency is used to buy goods and services anonymously. If made legal in the U.S., we would see a rise in illegal activities such as money laundering. The legalization of Cryptocurrencies in the U.S. would also be a threat to the U.S. dollar and economy whenever price volatility occurs.