How Is Decentralized Virtual Currency Regulated?

Abstract

Decentralized, and convertible Virtual Currency (VC) is an open-source, peer-to-peer (P2P) system that has no central administrating authority, monitoring, or oversight . It is cryptocurrency that is composed of cryptography that is extremely difficult to counterfeit . Examples are Bitcoin, or Etherum (ETH). It is traded by individuals using pseudonyms . The value of Bitcoin is not regulated by government, but by the principle of supply and demand . It has lower risk than conventional currency against regulatory systems because it does not rely on hierarchical human organization; rather, the currency focuses on “mining” computers . Regulation mandates for registration, and the licensing of the Financial Technology (FinTech) businesses operated by VCs. VC has benefits of increasing efficiency of transactions and alternatively buffering the failures of the government-issued currency, but has attracted the potential for misuse through crimes such as financing terrorists or drug dealing. Unleashing decentralized VC exposes the potential for crimes. Uniform coordination of Global Financial Regulatory Standards (GFRS) aims to maximize virtues of decentralized VC and minimize vices; however, it is vague. The project argues why decentralized VCs are security, and their virtues and vice. Next, what are regulations in the United States (U.S.) and European Community (EC). Internationally, the project reviews Basel Architecture, and Financial Action Task Force on Money Laundering (FATF). Also, it tests Dodd-Frank Act for regulation; and what limits of adopting GFRS. By discussing, the project aims to measure barriers of adopting FATF, or GFRS.