Crypto Mining Regulations
Sep 26, 2018 By Katherine Flores
Government Regulation – Interference, Protection… or both?
It’s no surprise governments find crypto currency mining fascinating. After all, making money used to be their exclusive thing. That’s why, as of 2017, more than 200 government agencies around the world, including the Department of Homeland Security, investigate the use of blockchain. In fact, you can check into the stats on this anytime with a visit to the Blockchain in Government Tracker.[i]
So, what are they in it for? After all, it can’t be 100% envy. Well, the answer depends on who you ask. Some say government interest in cryptocurrency mining’s about protecting their citizens. Others claim it’s more about taking back control. Check out our examples to see it may not be quite so black and white.
In some cases, such as with the UK’s National Cyber Security Centre, governments investigate blockchain in reaction to malicious miners. Hard to believe, but there are sneaky underhanded crypto currency miners who use malware to illegally mine the computers of unsuspecting users. Specifically, the recent CoinHive hack created this urgency for UK government intervention.
In this case, CoinHive pitched their software as an alternative to ads for websites to generate income. But in fact, their software placed malware on the computers of those who used the websites. This massive CoinHive attack hacked 4,275 oblivious websites and all of their users.[ii] Hacks like this create the desire for government regulation mainly to protect citizens and create systems that keep them, and websites, safe.
Other governments have made attempts to update their financial systems with blockchain to no avail. Hong Kong, for example, tried this and then declared that it wasn’t much better than their current monetary system. [iii]
Meanwhile in the US miners and crypto currency exchangers are soon likely to be subject to federal registration and disclosure requirements. That also means taxes are inevitable down the line. After all, the IRS affects us all and crypto currency isn’t likely to remain an exception for long. Of course, this doesn’t stop people from trying to avoid taxation, especially on the state level.
Illinois promised residents to create legislation for a “welcoming regulatory environment” to draw companies to the state.[iv] In fact, many states are taking this tactic as a magnet for business building in their state.
It’s not just Illinois, either. Arizona, Delaware, Nevada, Tennessee, Vermont, and Wyoming enacted laws that reference blockchain. [v] Separately, eight states amended money transfer laws. Most of these specify strict requirements for companies like Western Union that deal with money transfers, to address cryptocurrencies as of March 1st, 2018.[vi]
One Wyoming law, for instance, declares that bitcoins are “ultility tokens” and can’t be marketed as investments. That means issuers and miners must make reasonable efforts to prevent purchases of coins as an investment. Some experts think legislation like this law signifies a better way forward. Others think self-regulation is the only way that works for miners, sellers, and buyers alike.[vii]
Regulatory measures are a snowball situation. That means more legislation is pending around crypto assets than already exist. But keep in mind, the laws currently in effect include federal regulations, as well as state.
For instance, to operate nationwide, many crypto start-ups now need to get money transmission licenses from 53 states and territories. Think Western Union type rules… but applied to the bitcoin universe. Given the youth of this crypto mining world, it’s likely this is only the beginning. Prepare thyself to be governed, crypto bros!
Even More Crypto Mining Government Interference
Truth is, the crypto in government news spans the gamut of topics worldwide. Take Australia, where government employees were caught mining crypto currency using their work computers. Although it’s not illegal to mine in Australia, these particular miners were busted for sucking so much power from government computers for personal gain.[viii]
Speaking of illegal mining, China actually did ban it entirely in early 2018. This served a mighty blow to the mining community. That’s because before the ban more than 70% of crypto currency was mined in China. Their government cracks down hardcore now with coordinated raids. So, best to find another country for your next mining venture. China means business with this ban.[ix]
The situation in South Korea is less extreme but also involves government crackdowns. For instance, thanks to government aid, some South Korean regions have lower electricity prices to help out businesses like chicken farmers. So, when crypto miners are discovered in these regions it’s an illegal use of the cheaper power grid and they get shut down.[x]
On the opposite end of the spectrum, the Egyptian government secretly creeps into citizen’s computers to mine cryptocurrency. Although it’s not so secret anymore thanks to recent news reports outing them. Turns out, they used a scheme called AdHose to hijack unsuspecting Internet users then use their computer power to make money. So, Egypt took the idea of government interference to a whole new, noxious level.[xi]
But it’s not all bad when it comes to government attitudes toward crypto mining, currency, and blockchain tech. Just look at Dubai.
Dubai Dives into Crypto Currency
The Dubai emirate went on record saying they seek to become the “first blockchain-powered government”. In fact, Dubai already weaves blockchain technology into many of their government systems. Some examples are charging electric vehicles, notary services, and food safety parameters. Their ultimate goal is to enable Dubai citizens to buy a home and apply or enroll in school without a visit to a government office.
So, the impact of crypto currency mining spans the globe in a variety of ways. All the more reason to stay informed because there are new updates and breaking news on the topic every day.