Why is Bitcoin experiencing regulatory heavy-handedness in multiple countries?

Recently, Germany's Finance Minister Peter Altmaier and France's Finance Minister Bruno Le Maire held a joint press conference in Paris, saying that they will jointly push for global regulation of Bitcoin at this year's G20 summit in Argentina, which will warn that the world's most popular cryptocurrency is being exploited by illegal groups.

The imperfections and risks of the cryptocurrency trading market have become increasingly apparent since last year, as cases of illegal cryptocurrency "mining," trading and use have proliferated around the globe. In recent times, financial regulators in many countries have introduced policies to strengthen regulation of cryptocurrencies, and cryptocurrency prices have plummeted.

Bitcoin market explodes

Different from traditional currencies, bitcoin is actually a kind of encrypted data based on blockchain technology. Since last year, the price of cryptocurrencies has continued to rise globally, especially in December last year, the first bitcoin futures product officially traded in the U.S. spawned a worldwide digital cryptocurrency investment boom, and a number of digital cryptocurrencies have seen their trading volume and trading prices soar. Representatives of cryptocurrencies - bitcoin price within a year soared more than ten times, the market value once more than Disney, General Electric and other well-known listed companies.

"Crazy" bitcoin has become the new favorite of investors, but also become a disaster area for Internet hackers.

Bitcoin is based on the characteristics of not being controlled by the government, relatively anonymous, and difficult to track, and in recent years has been repeatedly exposed to malicious transactions, zombie viruses "mining" and illegal profit cases. At the same time, hacker attacks are frequent, the price of Bitcoin has skyrocketed and plummeted, and investor protection is still in a regulatory vacuum.

Cryptocurrency who to regulate, how to regulate, become a test of the governments of various countries . Currently, cryptocurrency transactions are anonymous, and it is difficult for regulators to collect statistical data to monitor their operation; for cross-border cryptocurrency transactions, countries also lack effective means of regulation; decentralized cryptocurrencies are also in conflict with the existing centralized regulatory framework, which has brought new difficulties to the regulation.

Recently, Blass, head of the U.S. Securities and Exchange Commission's (SEC) Division of Investment Management, published an open letter listing several reasons why the SEC has repeatedly rejected digital cryptocurrency exchange-traded funds, including risky valuations, lack of liquidity, difficulty in avoiding arbitrage risk, potential market manipulation and fraud risk.

At present, only Tunisia, Senegal and other countries have issued digital currencies based on cryptocurrency technology, and Poland and other countries are actively trying to develop national cryptocurrencies, but the attitude of most countries towards cryptocurrencies is still insisting on strict regulation, and have formulated and introduced a number of policies one after another to strengthen regulation.

Regulatory policies have been introduced one after another

The cryptocurrency market is facing continuous high pressure of regulation globally, and governments around the world are exploring the regulatory model of cryptocurrency transactions that is suitable for their own national conditions.

Nordic United Bank, the largest bank in the Nordic region, has recently issued a ban on employees to stop trading in bitcoin and other cryptocurrencies from Feb. 28 this year; India's tax department said on Jan. 22 that it issued tax notices to hundreds of thousands of people after a nationwide survey showed that cryptocurrency trading in the country exceeded $3.5 billion over a 17-month period; and South Korea's financial regulator agency announced that as of Jan. 30, it will ban cryptocurrency transactions using anonymous bank accounts.

The effect of strict regulation is clear. Not long ago, the spot bitcoin price in the international market plunged nearly $2,000 in one day. After the price of bitcoin surged to a high of $20,000 in December 2017, it has now fallen to about $11,000 dollars. A growing number of industry insiders believe that bitcoin could become the next economic bubble.

Nobel Prize-winning economist Robert Shiller said the bitcoin phenomenon is like the famous "tulip mania" in history, and the end is "very likely to be a complete collapse and forgotten".

"I wouldn't be surprised if the price of bitcoin fell to $1,000 to $3,000 in the next year." As global interest rates rise, a cryptocurrency crash will follow, said Pete Bukwa, chief investment officer at U.S.-based Berkley Financial Group. The loose monetary policies offered by the Federal Reserve and others to mitigate the effects of the global financial crisis are responsible for the cryptocurrency boom.

The current international community is also discussing whether the bitcoin bubble will trigger systemic financial risks once it bursts due to the large number of traditional investors and financial institutions involved in bitcoin trading. Experts said that the regulatory initiatives currently introduced by various countries are also looking for the strength and ways acceptable to their countries, which can both strengthen regulation and avoid risks.

The international community needs to strengthen policy coordination

In the face of regulatory initiatives introduced by various countries, cryptocurrency trading platforms to play a game of "whack-a-mole," looking for space to survive in countries around the world.

In recent times, Poland has attracted the attention of more and more cryptocurrency trading companies, and the Polish currency zloty ranked fifth among the currencies with active bitcoin trading last year, which was unexpected by many people. "The Polish government actively promotes the development of virtual currencies, and Poland's financial system is relatively more accommodating to cryptocurrencies than other Western European countries." Quiadic, an investor who trades cryptocurrencies in Poland, told reporters.

"The current countries in the introduction of regulatory policies on cryptocurrencies overall more cautious, on the one hand, is worried about stifling the related technology environment, on the other hand, but also worried about the generation of financial risks, the policies introduced by the countries are also some tight and some loose, to the regulation of bitcoin has brought a new difficult problem, so the regulation of cryptocurrencies for the global coordination and cooperation is also needed. " Prof. Liu Junhai, director of the Institute of Commercial Law at Renmin University of China, said.

The issue of bitcoin regulation is likely to become a new topic at this year's G20 summit. Le Maire has repeatedly said that he will propose to discuss the issue of Bitcoin at the G20 summit, for speculative risks, member states all need to discuss together to manage the regulation of Bitcoin. U.S. Treasury Secretary Steven Mnuchin also said recently that he would work with the G-20 to prevent cryptocurrencies such as Bitcoin from becoming the digital equivalent of an anonymous Swiss bank account.

Experts suggested that the G20 and some international financial institutions should speed up the formulation of relevant principles and guidelines to provide cases and follow for countries to establish coordinated regulatory policies. At the same time, global synergy in regulation should be realized to ****together combat illegal cryptocurrency transactions and crimes.