While investing in cryptocurrencies like Bitcoin, Ethereum, and even stablecoins may have appeared absurd just a decade ago, holding a certain percentage of your portfolio in cryptocurrencies like Bitcoin, Ethereum, and even stablecoins is now rather common. After all, over the previous decade, cryptocurrency’s popularity and utility have skyrocketed. Furthermore, customers appreciate crypto’s decentralized structure, especially since the federal government is constantly looking for new ways to track frequent consumer transactions in USD.
However, it’s not unexpected that the Biden administration is looking for new ways to trace transactions that take place in private crypto wallets. In fact, according to some sources, President Biden may issue an executive order soon to guide government agencies in their efforts to control digital assets.
While you may be afraid about the government scrutinizing your cryptocurrency transactions, most investors don’t need to be concerned – at least not now. If you’re curious about why the government is interested in how much crypto you have or how you use it, keep reading.
Why Does the Government Monitor Crypto?
It’s crucial to note that the authorities may perceive private crypto wallets as a potential alternative to regular bank accounts, according to Shaun Heng, VP of Growth & Ops at CoinMarketCap. A physical bitcoin wallet, on the other hand, does not actually hold or store any digital assets, as he points out. “Instead, a crypto wallet simply stores the private keys required to access assets recorded on the blockchain,” he explains.
Because all digital assets are maintained on the blockchain, which is essentially a ledger or record of all crypto transactions, all digital asset transactions are by definition public and traceable.
“Transparency is one of the most important aspects of blockchain technology,” Heng explains.Even if currency is decentralized, the government still has a vested interest in keeping track of where it is traveling. However, the government is constantly concerned in preventing crimes such as money laundering, human trafficking, and fraud.
Government agencies, according to Cabital CEO Raymond Hsu, are understandably concerned about cryptocurrency exchanges that lack adequate anti-money laundering safeguards.
“These exchanges would appeal to financial criminals, terrorist financiers, and sanctions evaders, eroding the reputation of the countries in which they are based,” he argues.
The government is concerned, according to HiCollectors CEO Scott Steward, that people would be able to move enormous sums of money through private crypto wallets without being taxed or regulated.
“The goal of private wallets is to keep transactions private,” he argues, “but the lack of regulation could put the economy in jeopardy.” “If people have the ability to move enormous sums of money with little to no control, it may lead to dangerous investments and other bad activities.”
That is why, he claims, the federal government is putting in a strong effort to make crypto secure.
However, some analysts feel the government has malicious intentions when it comes to tracking cryptocurrency transactions. For example, according to Modulus CEO Richard Gardner, the Fed “wants complete control over monetary policy in order for the federal government to have complete control over our privacy, as well as the ability to shutter, or alternatively, tax alternative payment mechanisms out of existence, should they deem it necessary.”
As a result, he believes that crypto enthusiasts and the general public should be quite concerned about these developments.
Ozzy Dot, a cryptocurrency specialist who goes by the handle @OzzyDotClips on TikTok, recently discussed this type of issue in one of his videos. As he mentioned, a Canadian Superior Court of Justice recently ordered that the assets of users who participated in a protest against vaccine mandates be frozen by a crypto firm named ‘Nunchuk.’ The business stated the following in a response to the Canadian government:
“With the exception of email addresses, we do not collect any user identification information.” “We don’t have any keys either,” they added. “As a result, we can’t ‘freeze’ our users’ assets; we can’t ‘keep’ them from being moved; and we don’t know about ‘the existence, type, value, and location’ of our users’ assets.” This is on purpose.”
The note stated, “Please look up how self custody and private keys function.” “When the Canadian currency loses its value, we’ll be here to help you as well.”
This, according to Ozzy Dot, is why governments are concerned about private crypto wallets. When compared to traditional centralized banking, they can’t be frozen or seized, therefore the powers that be don’t have the power and control they want.
Should Crypto Investors Be Concerned About Regulation?
Ordinary crypto investors, for the most part, don’t have to do much to be compliant with their accounts other than pay taxes on qualified transactions. Consumers should already be tracking their bitcoin transactions and reporting gains and losses, according to financial advisor Julian B. Morris of Concierge Wealth Management. If not, increased regulation may compel some crypto investors to join the bandwagon.
Morris recommends establishing a spreadsheet of dates and prices of transactions for individuals who aren’t keeping track of their crypto transactions yet. This way, you’ll have paperwork that matches the blockchain and is easier to declare for tax purposes. He also mentions that if you connect your wallet to a provider, it can generate these reports for you.
Meanwhile, crypto investors and average customers should remain calm. Any mechanisms put in place to track cryptocurrency transactions will be aimed at detecting unlawful monetary movements such as fraud and money laundering. You have nothing to worry about if you’re investing in crypto in a normal way, without trying to hide money, cheat taxes, or breach the law.
