What is cryptocurrency
Cryptocurrency is a form of digital currency that operates independently of central banks and utilizes cryptography to secure transactions and control the creation of new units. The first and most well-known cryptocurrency is Bitcoin, which was created in 2009 by an unknown person or group of people using the pseudonym Satoshi Nakamoto.
Cryptocurrency operates on a decentralized system, meaning it is not controlled by a single entity such as a government or a central bank. Instead, transactions are recorded on a public ledger called a blockchain, which is maintained by a network of computers around the world.
To use cryptocurrency, individuals must first acquire a digital wallet to store their currency. They can then buy and sell cryptocurrency on various online exchanges or through peer-to-peer transactions.
One of the key benefits of cryptocurrency is its security. Transactions are encrypted and processed through the blockchain, making it extremely difficult for hackers to steal funds or manipulate the system. Additionally, the decentralized nature of the system means there is no central point of control, reducing the risk of fraud and counterfeiting.
Another advantage of cryptocurrency is its transparency. All transactions are publicly recorded on the blockchain, making it easy to track the movement of funds and ensuring accountability.
However, there are also some drawbacks to using cryptocurrency. For example, its value can be highly volatile and subject to rapid fluctuations. This can make it difficult for individuals to use cryptocurrency as a reliable store of value. Additionally, because it operates independently of central banks and governments, there is no one to regulate the system or provide a safety net in the event of problems.
Despite these challenges, the use of cryptocurrency is rapidly growing and is being adopted by a growing number of businesses and individuals. Some experts believe that it has the potential to completely change the way we think about money and financial transactions.
In conclusion, cryptocurrency is a new and innovative form of digital currency that operates on a decentralized system and uses cryptography to secure transactions. While it has its benefits, it also presents some challenges and its future remains uncertain. However, as the use of cryptocurrency continues to grow, it is likely that we will see even more developments and innovations in this exciting area of technology.
November 6th, 2020, Pakistan’s Securities and Exchange Commission (SECP) released a paper outlining potential approaches for regulating cryptocurrency in their country. The SECP worked with the Financial Action Task Force for guidance and is inviting public commentary on the matter.
The SECP claims to focus on the second approach outlined in the paper, advocating for a ‘let-things-happen’ approach described by the CFCT. Pakistan aims to embrace the financial benefits of digital assets and innovation without overregulating.
One option is to register Initial Exchange Operators by requiring due diligence procedures, ultimately allowing public offerings in capital markets through issuing security tokens. Three approaches to secondary trading are offered: secondary trading on decentralized exchanges; separately register Digital Assets Trading operations that provide custodian services; or allow secondary trading on the Pakistan Stock Exchange. Additionally,
The Central Bank clarified that Pakistan has not banned cryptocurrency, easing their position from a statement in 2018 that urged banks and payment providers to refrain from engaging in cryptocurrency in any capacity. The implementation of a comprehensive regulatory framework seems probable in the near future.
P.S. Insights on Cryptocurrency Legal Issues
Most jurisdictions and authorities have yet to enact laws governing cryptocurrencies, meaning that, for most countries, the legality of crypto mining remains unclear.
Under the Financial Crimes Enforcement Network (FinCEN), crypto miners are considered money transmitters, so they may be subject to the laws that govern that activity. In Israel, for instance, crypto mining is treated as a business and is subject to corporate income tax. In India and elsewhere, regulatory uncertainty persists, although Canada and the United States are relatively friendly to crypto mining.
However, apart from jurisdictions that have specifically banned cryptocurrency-related activities, very few countries prohibit crypto mining.
Our Freeman Law Cryptocurrency Law Resource page provides a summary of the legal status of cryptocurrency for each country across the globe with statutory or regulatory provisions governing cryptocurrency. The globe below provides links to country-by-country summaries:
Submit by: Web Desk