Despite strongly fluctuating exchange rates, cryptocurrencies now enjoy great popularity and the status as "mainstream". Governments and their authorities have also long since entered the scene in order to regulate, monitor and prevent falling behind. Although various countries have strong differences in terms of acceptance and attitudes towards cryptocurrencies, there are still countries, predominantly in Asia, that completely ban Bitcoin and Co. However, European countries and North America have already taken many steps towards regulating cryptocurrencies and their applications. In July 2018, for example, we reported on measures taken by (tax)authorities that are tracking down cryptocurrency users. Together with the market, these measures have developed further, thus this is todays status (February 2019):
Government data tracking
In the field of data tracking, there is a strong focus on cooperation with crypto exchanges, programs for screening user data and government regulations. For example, the United States Securities and Exchange Commission (US SEC) is looking for a big data tool to monitor blockchains. Its goal is to identify risks and improve compliance. In addition, Nasdaq, North America's largest electronic exchange, reports that 7 crypto exchanges are already using its monitoring technology to detect illegal market activity.
A notable example from January 2019 is Denmark. The Danish tax authority has been empowered by the country's tax council to request all information from crypto transactions from three specific exchanges. The affected crypto exchanges are now legally obliged to disclose the data of their users upon request. These include names, addresses, personal tax numbers and details of their transactions in 2016, 2017 and 2018.
Worldwide there are differing activities of governments, here are some of their strategies:
- Japan plans to introduce a system that can track transactions with cryptocurrencies.
- Crypto exchanges are forced by legal frameworks to introduce KYC (Know-your-Customer) policies.
- Russia assembles profiles with information from suspicious users.
- The USA extracts raw Internet data that allows access to IP addresses and IDs of Bitcoin merchants.
- The Chinese Public Information Network Security Supervision (PINSS) Agency monitors foreign exchanges.
- The EU implements stricter anti-money laundering guidelines for crypto exchanges.
Whether it's through crypto-market guidelines or technological developments to directly track users' data, governments around the world are constantly developing new ways to track criminal activity.
In addition to governments that work together to minimize criminal activity with cryptocurrencies, crypto exchanges also unite for this purpose. In January 2019, for example, four South Korean exchanges formed a team to address the issue of money laundering. The exchanges Bithumb, Coinone, Korbit and Upbit announced that they would develop a hotline to transmit real-time data among each other. Their aim is to create a common database with suspicious wallet addresses, to help identify and stop criminals.
What does the future hold?
It is difficult to predict how quickly monitoring programs will develop, new cooperation between governments will emerge, or further solutions will be found to regulate the cryptocurrency scene. What is certain, however, is that authorities will continue to implement a clearly defined and, above all, secure system to protect investors and users from criminal activities. It should not be ignored that at the same time technologies will develop that counteract this. Nevertheless, a very straightforward recommendation can be derived from this: In order to be safe from the tax authorities, clear documentation of transactions and profit amounts has to be made. A possible tool for this is the Blockpit platform. With Blockpit, data can be entered automatically by means of API or CSV, and in the remaining cases also manually. The own dashboard then not only provides an overview of all transactions, but also determines the tax burden resulting from profits. The generated tax report can be submitted to the tax authorities without any further problems. A quick and easy way to avoid unjustified suspicion by the government!
US SEC wants Big Data Tool to monitor blockchains
Monitoring technologie from Nasdaq
Denmark collects user data from crypto exchanges
Governments worldwide monitor the crypto space
South Korean exchanges against money laundering