Ways of regulating Bitcoins: A comparative study

Introduction

Bitcoin and cryptocurrency are the most talked about alternative investment opportunity. As opposed to money the concept of Bitcoin came up in 2009 by an anonymous person named Satoshi Nakamoto, who released white paper Bitcoin first and then worked on the software for Bitcoin[1]. Bitcoin is a digital form of currency, which is a creative payment network used for the peer-to-peer technology to operate without any support of banks and central authority[2]. Hence, Bitcoin regulation is very important in the country, as it is considered to be the assets that can be used during economic turbulences. If any fraudulent activity takes place while using the software, the blockchain will prevent the file from being damaged. 

The price of the Bitcoin depends and increases gradually while its demand gets an increase. It has been seen in 2017 that the price of the Bitcoin was $1000 at the beginning of the year and $19000 at the end of the year[3][4]. However, the value of the Bitcoin reduced by $8000-9000 in recent years. There are people who think that the digital currency might be the only currency in future due to faster payment process and also it can be exchanged against traditional money thus makes them invest in Bitcoin. Considering its significance, this paper intends to evaluate the regulatory treatment of this virtual currency in the United Kingdom (UK) and the outlook of this nation regarding the regulation of Bitcoin.

Regulatory Risks of Bitcoin

According to European Banking Authority (EAB) the virtual currencies will not fulfill all the requirements of virtual currencies; hence, it should not be treated as it should not fall under any legal framework. There are many issues identified while using Bitcoin for exchange for traditional currency or investing in Bitcoin. The following points will explain the risks of using Bitcoin. A "virtual monetary scheme" is a method for instalment where exchanges happen just inside and through the web.  In payment frameworks, for example, between bank payments or PayPal, there is a requirement for a position to approve exchanges: a bank or an instalment specialist co-op, for example, PayPal. In case of authentic money, a middle person has likewise required: the national bank is the one which chooses how a lot of money to issue, and the state decides which monetary forms are viewed as legitimate methods for payment – lawful delicate – in a given locale.

• Many investors have been alerted for identifying issues in Financial Industry regulatory Body (FINRA), Securities and Exchange Commission (SEC) etc.[5]. Additionally, investing in Bitcoin might be very risky as it does not keep long term record and give a high return on investing in Bitcoin. 

• The value of Bitcoin fluctuates in the market: the value might be high for 10 days consistently and after a few days the price might drop by 50%-60%. That increases fear among the people who find risk in investing in Bitcoin. Therefore, if less people invest it will decrease the value of Bitcoin.

• Bitcoin can be exchanged digitally with the help of the software and digital wallets that involves threat from hackers, data theft, operational hacks etc. Additionally, it has a threat from the internet-connected computer that has Bitcoins stored in it. The security risk mostly occurs while people exchange Bitcoin in the market in the form of buying and selling Bitcoin with the help of computers.

• People are always risk-averse in nature; therefore, security issues become very important for them. There are many risks of using Bitcoin investment or exchange, as it is a virtual currency and treated as assets that add value to it. Bitcoins might be used in the black markets, to avoid taxes, money laundering and might involve in illegal activities. Hence, there are laws and regulations implemented by different countries to reduce corruption and fraud by exchanging and investing in Bitcoin.

Research Aim and Objective

The primary aim of the study is to understand the regulatory system of Bitcoin in the UK to find gaps, which are prevailing within the existing system. Thus, the study would help to identify the regulatory risks that are included in the regulation of bitcoin in the UK, and the measures adopted to mitigate risks. Thus, to achieve the primary aim of the study, the following secondary objectives are been developed.

• To identify the risks and challenges of regulations of bitcoin in the UK.

• To understand and compare the regulatory laws regarding cryptocurrency in other countries.

• To identify the potential market for the regulation of Bitcoin.

• To provide various suggestions to mitigate those challenges and reduce the risks for improvement of the Bitcoin regulation.

Research Question

From the above discussion this paper has raised the following questions in order to understand the regulation of bitcoin in the UK and the difference between the other countries’ rules and regulation. Thus, it will help to understand the current challenges faced by the regulators of Bitcoin and to mitigate those by adopting different strategies.

• What are the challenges faced while regulating bitcoin in the UK and difference among the other countries?

• What are the strategies should be adopted to mitigate the regulatory challenges of Bitcoin in the UK and other cryptocurrencies?

Significance of the regulation of Bitcoin

Bitcoin is defined as the digital form of currency or a creative payment network that uses peer to peer technology to operate without any assistance from a central authority or any financial institutions. The significance of the study is to identify the issues of regulating Bitcoin in the UK and the challenges faced by the country. Thus, this paper will help to understand the regulations of Bitcoin in different countries and compared it with the UK. Thus, the country will understand what the measures can be taken to overcome those challenges and reduce the regulatory gaps in the country. Moreover, the study will help to eliminate fraud incidents and reduce the chances of fraud and money laundering. Hence, the paper will contribute and review all the other judicial modification that improves the regulations of Bitcoin in the UK.

Literature Review

Overview of Bitcoin

The Financial Conduct Authority (FCA) in UK is the body who in charge of taking care of the cryptocurrency of the country to prevent money laundering, but no such regulation has been introduced to control Bitcoin in UK. Currently, the software is not regulated in the UK and no such permissions have been made that can expand the Bitcoin market. Bitcoin is very much similar to e-money, but observing the definition of the Bitcoin and e-money indicates that these two-payment modes are different from each other. Hence, in the Electronic Money Regulations 2011, e-money is defined as “electronically stored monetary value” that can be issued for making transactions on receipt of funds[6].

According to Bank of England Act 1988, section 2A, explains that the financial market of the UK is stable and the size of the market that regulates cryptocurrency is not very large to get a position that would have risk[7]. Any organization that goes into exchanges that include cryptographic forms of money are subsequently treated in a similar way with respect to ordinary exchanges under the current corporate assessment rules, and increased money made are saddled appropriately. For unincorporated organizations, individual function is chargeable to the benefits and misfortunes that can be credited to crypto currency exchanges. The UK likewise assesses the income of exchanges wherein an increase is acknowledged after an exchange with crypto currencies forms of money if an individual sell and buy coins as a financial specialist. Such picks up fall inside capital increases expense, and this assessment is chargeable to any increase made that includes a cryptocurrency[8].

Bitcoin has been considered as a legal asset in which the large companies make investments. The evolution of the Bitcoin as per as the timeline hold the importance in the history of Bitcoin. In the month of August, 2008, the Bitcoin.org files the registration in the website called Anonymoussspech.com and the founders of the website were Satoshi Nakamoto and Martti Malmi[9]. On that year, in the month of October which is the regarded as the official birth of Bitcoin, Satoshi Nakamoto published the white paper and described the details about the Bitcoin that it does not need any financial institution to transfer the money. The White paper then consist of total 11 sections including the transaction, payment verification, privacy, the proof of work etc and then in January, 2009, he created the Bitcoin Block chain Block. The First Bitcoin transaction took place in that month when the core software for the Bitcoin was launched [10]. The electronic Frontier foundation which is a non-profit organisation first took the step to accept Bitcoin from January 2011 but stopped accepting it from June onwards after showing the lack of legal regulation in the new currency system.  From 2012 onwards people started to accept the digital currency and published many sources defining that there is no need of central bank in the regulation of Bitcoin which is absolutely digital. In August 2012, the plans were announced to launch the Bitcoin debit card through the Bitcoin transfer service called Bit Instant. The crypto currency Legal Advisory group (CLAG) stressed on the issue of the realisation event in which focuses on the importance of the taxpayers on identifying whether the taxes are restricted with the Bitcoin related transaction. In the year 2013, the German Finance Ministry has identified Bitcoin as the unit of the account. But the announcement of Bitcoin regulation made the fluctuation between 11-15% in the exchange rate. The crypto currency world has been expanding from 2017 and its market hosts around 2000 digital currencies and still it has been increasing. 

Bitcoin Regulations in UK

Bitcoin is regarded as a digital currency that uses peer-to-peer technology and crypto currency in order to generate and manage monetary transactions. Presently, the UK has no particular law pertaining to Bitcoin[11]. However, it is also worth mentioning that crypto currencies are not accepted as a legal tender in the country. Exchanging such crypto currencies requires compulsory registration. A statement brought out by HMRC pertaining to tax treatment of crypto currencies states the fact that their “unique identity” posits that they are incomparable to conventional payments or investments, and their taxability relies upon the type of activities and associated parties. Gains or losses associated with Bitcoin are dependent on capital gains tax. 

In order to exchange crypto currency in the United Kingdom, registration with the Financial Conduct Authority (FCA) is mandatory[12]. However, some crypto business entities may be able to acquire an e-licence as an alternative method of exchanging crypto currencies. Though it does not contain any special provision pertaining to exchanges, the guidance encoded by FCA posits that businesses involving into Bitcoin-related activities that come under pre-existing financial regulations need authorisation. Value-added tax (VAT) can only be imposed on the suppliers for any services or goods sold in the UK by using crypto currencies. Any business organisation that carries out transactions involving crypto currencies like Bitcoin are therefore treated in the same way as traditional transactions under present corporate tax rules[13].

In 2018, Mark Carney, the Governor of the bank of England, posited that specific legislations pertaining to the crypto currency in the UK are likely to come. In order to develop a suitable strategy to address crypto currency-related risks, the FCA has been working collaboratively with UK Treasury and BOE. However, it has been announced by the European Court of Justice (ECJ)that as Bitcoin cannot be considered as tangible assets, VAT cannot be imposed on Bitcoin-related transactions.

Bitcoin and other Cryptocurrencies

Cryptocurrencies are known to be the digital currency, which regulate without the government intervention and no banks are involve in the process, so that the users are not liable to pay the huge transactional costs to the banks. As [14]there are major differences between regulations of bitcoin and other cryptocurrencies, are the following:

• The main aim of regulating Bitcoin in the country is to increase the transaction speed without any government regulation. However, the cryptocurrencies are mainly provided for the safe and low-cost transaction.

• Some specific restrictions have been made to the trading of Bitcoin as a digital currency, however, there are many cryptocurrencies, which are specially used for the trading purpose and do not have any restrictions.

• There are many cryptocurrencies in the country but of them are not known by the people as these are not get that much popularity as much as Bitcoin have gained in different countries.

• Bitcoin regulation in the countries has been computed by maintaining anonymous ledger transactions. Hence, various anonymous and meaningless numbers have been found in the ledger without any specific sequence. Nevertheless, there are many other cryptocurrencies that have been used for trading and other purpose which maintain the transparency during transaction.

• There are a lot of cryptocurrencies that are secured to be used for the exchange of goods and services with or without of any government interference. Whereas, the bitcoin has been used for lowering the transaction cost and reduce time for the users, which has merely failed to be flexible.

• Bitcoin does not have the intermediaries during the transaction of the goods and services; thus, it helps to reduce the cost of transaction. However, it is not permitted as a secured and safe medium of peer-to-peer transaction. On the other hand, the cryptocurrencies are the kind of virtual currency that regulates without any control of banking system. The technology used in the regulations of other cryptocurrencies is transparent and reliable than the regulation of Bitcoin in the country.

Hence, the above differences among the cryptocurrencies with the regulation of Bitcoin in different countries represent the transaction of the goods and services with the virtual currency are not very safe because of low government regulations. Hence, these lead to less reliable for the people to trust peer to peer transaction through the virtual currency Bitcoin. Additionally, there are many other cryptocurrencies which regulates by following all the governmental rules and regulation, which are more reliable than Bitcoin.

Legal and Regulatory Development Pertaining to Bitcoin in UK

The Financial Conduct Authority is responsible for overseeing the condition of the financial markets in the United Kingdom. The regulatory body has cleared its position on crypto assets. In 2019, the latest policy brought out by the FCA incorporates an array of crucial definitions and clarifications. For instance, cryptocurrencies like Bitcoins that are regarded as “exchange tokens” have not been regulated[15]. However, they must come under anti-money laundering regulations of the country. Furthermore, the statement also reveals that “security tokens” that falls under the category of “specified investment” will come under the remit of the watchdog[16]. It is worth mentioning that earlier it has been proposed by the regulatory body that some investment associated with cryptocurrency should be banned in order to secure the interest of the retail investors. It is worth mentioning that Bitcoins along with some other cryptocurrency have been causing many headaches for the regulators of the United Kingdom. Recently, the financial watchdog of the country has brought out a consultation pertaining to the existing guidance associated with crypto assets amid apprehension that business entities can put their consumers at serious risk by providing unauthorised services[17]. On request of the UK Crypto asset taskforce, the FCA has brought out its consultation in order to bring more clarity in the existing regulatory regime. Moreover, a framework has also been set up by FCA to classify various crypto assets: Exchange tokens (such as Bitcoin, Litecoin and so on), utility tokens and security tokens. However, some experts opine that FCA has no jurisdiction to regulate utility tokens because they do not comply with criteria to be ascribed as security tokens. A 10-week time span has been determined by the FCA in terms of bringing out the feedback and also the final paper of the guidance.

A Critical Appraisal of Regulation in Other Countries

The legal and regulatory status varies differently from country to country and they are still evolving in nature. Therefore, to evaluate the regulatory gaps of Bitcoin in the UK it is important to compare and contrast the laws with the other countries. The Australian Ministry of Finance has not sill approved the legality of bitcoin as financial instruments. Financial Market Authority (FMA) has stated that regulatory modification of bitcoin should complement the public education also. According to the Ewald Novotney, the governor of the Australian National Bank opined that bitcoin is considered as highly speculative instruments which are quite risky from the consumer perspective. Hence, Australia has been seen to be regulated the power of cryptocurrency provider, hence, the cryptocurrency should be treated as a property and capital gained tax should be imposed on it[18]. 

On the other hand, as per the constitution of America, the bitcoin regulatory system doesn’t consider it as the legal framework. The U.S. Securities and Exchange Commission has not issued any regulations yet, several warnings about the fraud and volatility risks have been shared with a view of stifling and controlling the implementation of Bitcoin and its use. The United States has implemented the legal amendment to several financial issues in the past that resulted in market stability and potential growth. The United States is waiting for the new regulation and watching the Bitcoin to evolve in the market naturally. However, some cryptocurrencies in the United States are slightly regulated by the Bank Secrecy Act and Investment Advisor Act to protect customers from any fraudulent financial activities and money laundering related crimes. The Financial Crimes Enforcement Network (FinCEN) is the US department of treasury regulates bitcoin since 2013 which comes under the Bank Secrecy Act[19]. Additionally, according to Internal Revenue Service (IRS), the US categorised bitcoin under property for taxation, thus sales tax can be applied on Bitcoin rather than VAT. Because of these extraordinary attributes, Bitcoin's lawful order stays unsure. From one perspective, the United States has put forth noteworthy attempts to control Bitcoin as money, subject to a government hostile to tax evasion guidelines. Then again, the IRS as of late declared that it would consider Bitcoin a type of property, exposing each Bitcoin exchange to capital increases charge. Different nations have adopted similar conflicting strategies. Brazil has avoided naming Bitcoin a money, requiring Bitcoin holders to record capital additions like some other security. The U.K. has expressed that a legitimate authority characterization is untimely until controllers ultimately see how Bitcoin functions; yet, it has additionally treated Bitcoin as an "assessable voucher." Finally, Japan has straightforwardly recognized that Bitcoin is neither a cash nor a money related item. Yet, those digital monetary forms might be dependent upon new exchange runs what's to come. Despite these contrasting perspectives, one shared characteristic remains: no nation has occupied with the investigation in regards to Bitcoin's grouping under existing protections laws.

A critical symposium on Bitcoin regulation in the United States:

It is not easy to explore a consistent legal framework to cryptocurrencies in the US. Laws pertaining to cryptocurrency may be different from state by state. Though the Financial Crimes Enforcement Network does not regard cryptocurrencies to be legal, since 2013 they are regarded as exchanges like money transmitters[20]. Contrarily, the IRS considers cryptocurrency like Bitcoins as property. It has also brought out tax guidance accordingly. It is relevant to point out that the US Treasury has distinguished Bitcoin as a decentralised convertible virtual currency in the year of 2013. The CFTC has started to regard Bitcoin as a commodity since September 2015. Bitcoin was also incorporated in the opinion of the US Supreme Court (on Wisconsin Central Ltd v. United States) concerning to the swiftly changing definition of money in the country[21].

Regulations pertaining to the exchange of cryptocurrency are also lacking certain legal territory. It has been posited by the Securities and Exchange Commission (SEC) that cryptocurrencies like Bitcoins can be considered as securities. In March 2018, the organisation further posited that it was considering imposing securities laws pertaining to digital exchanges and wallets in a comprehensive way.  On the contrary, the Commodities Future Trading Commission (CFTC) has incorporated a friendlier approach, ascribing Bitcoins as a commodity and permitting cryptocurrency derivatives to transact publicly. FinCEN, as a reply to guidelines brought out by FATF in 2019 that posits exchanges accumulate and share relevant information about beneficiaries and originators of transactions (Predominantly known as “travel rule”), has cleared its position in recent time. It regards the transaction of virtual currency in the same paradigm as conventional money transmitters. Following the line, all the rules and regulations that are applicable to conventional money transmitters can also be imposed in the context of virtual exchanges. This encompasses regulations incorporated in the Bank Secrecy Act, which has set up its own interpretation of “travel rule”.

Juxtaposing the Bitcoin regulation of the UK and UK, it is evident in both the countries lack a consistent legal approach in terms of regulating Bitcoins. However, in both the countries Bitcoins can be exchanged. In the UK, one needs to do a proper registration before FCA in order to exchange cryptocurrencies like Bitcoins. Likewise, in the US, in accordance with the guideline of FATF, FinCEN has suggested that information about the beneficiaries and originators need to be harnessed. In the US, as per the considerations of the IRS, cryptocurrencies are considered as property. In accordance with the UK Jurisdiction Taskforce, crypto assets are recognised as “tradable property”.

A critical symposium on Bitcoin regulation in Canada:

Like the US and the UK, cryptocurrencies are not regarded as valid legal tender in Canada. But the exchange of cryptocurrencies is permitted under certain terms of conditions. However, the Canada Revenue Agency has imposed tax on them from 2013. Unlike the United Kingdom, Canada has been much proactive in terms of dealing with cryptocurrencies. The country has developed an effective law known as Proceeds of Crime (Money laundering) and Terrorist Financing Act in order to regulate cryptocurrencies[22]. However, the regulations pertaining to cryptocurrency exchange is incongruous in Canada at the provincial sphere. However, at the federal level, Bitcoins are treated by the authority as securities. In 2017, a notice has been issued by the Canadian Securities Administrators concerning the applicability of the presently operational securities laws pertaining to cryptocurrencies. The cryptocurrencies are characterised as securities in 2018 by the chief of Canada’s Central Bank. In Canada, exchanges of crypto currencies have been regulated in the same method as money services entities. However, they are subject to reporting obligations. Like the UK, all kinds of cryptocurrency transactions need to be registered with the Fin TRAC. Business entities dealing with cryptocurrencies need to maintain required records and report transactions associated with terrorism. However, these regulations will be effective from June 1. 2020. While rules and regulations pertaining to Bitcoins have been relentlessly evolving, there is no indication of additional laws to regulate the transaction of cryptocurrencies.

The law is also applicable to non-Canadian cryptocurrencies in case they have Canadian consumers. As per the legislation of the country, banks cannot maintain a correspondent banking association with the business entities dealing with virtual currencies. In April 2018, the Bank of Montreal has stated that it would block the debit and credit card of those customers who will use their cards in exchanging or buying cryptocurrency. Comparing with the Bitcoin regulation of the UK and the US, the regulation in Canada is much comprehensive. Like the UK and the US, registration is compulsory in Canada to exchange the cryptocurrencies. In the UK, exchanging Bitcoin requires registration with FCA. Likewise, in Canada, exchanging crypto currencies requires registration with Fin TRAC. Comparing to the Bitcoin regulations with the UK, it is discernible that Canada has adopted a much proactive approach in terms of dealing with virtual currencies[23]. Moreover, the banks operating in Canada have taken a tough stance to stop the use of crypto currencies in terrorism.

A critical symposium on Bitcoin regulation in Singapore:

Like the United Kingdom, Bitcoin are not considered as a valid legal tender in Singapore. However, in Singapore, trading and exchange of Bitcoins are considered as legal. Unlike Canada, the state has adopted a friendlier approach pertaining to the issue. Though crypto currencies are not regarded as legal tender in the country, the tax authority of Singapore has termed Bitcoins as ‘goods. Therefore, Goods and Services Tax (called value Added tax in Singapore) also applies to crypto currencies. The Monetary Authority of Singapore has adopted a soft stance in terms of dealing with the exchange of crypto currencies, implementing the pre-existing rules and regulations. In January 2018, a press release has been brought out by MAS warning the common people of the country about the possible risks associated with crypto speculation.  The entity has states that if Bitcoin becomes ineffective by any reason, it would not be possible to trace those who are liable for refund. 

Earlier in December 2013, it has been stated by the MAS that those businesses taking Bitcoin in exchange for their services and goods would not be intervened by MAS as it would be considered as a commercial decision. In 2014, an array of tax guidelines has been issued by the Inland Revenue Authority of Singapore. In accordance with such guidelines, the transaction of Bitcoin has been regarded as to exchange of barter in case it has been utilised as a method of payment for concrete services and goods. Tax will be imposed on the Business entities associated with the exchange of Bitcoin in compliance with their Bitcoin sales. In 2019, with the passing of the Payment Services Act, all kinds of cryptocurrency businesses and exchanges come under the regulatory framework of MAS[24]. The legislation has become effective from January 2020. In April 2019, Bitcoins are considered as token of digital payment by MAS for objectives if the payment Services Act. Like all the above-mentioned countries, registration with a regulatory body is mandatory is compulsory in terms of exchanging Bitcoins. However, compared to the position of Canada, Singapore has adopted a much soft stance in terms of dealing with the exchange of Bitcoins. The state has done so by applying its existing legal frameworks. Whereas Bitcoins are considered as ‘foreign currency’ in the United Kingdom, it has been considered as barter exchange in Singapore.

A critical symposium on Bitcoin regulation in Brazil:

A committee has been set up by the president of Chamber of Deputies of Brazil which has discussed to take into account the cryptocurrency regulations in Brazil. Being the lower house of the national congress party, the president is included in the representative in every four hours. In May 2013, the deputy president Rodrigo Maia has requested the special cryptocurrency regulations under the bill 2303/2015 which not only focused on Bitcoin but also the digital currencies in Brazil[25]. The meeting and the discussion were mainly concentrated upon the recognition of the cryptocurrencies and the blockchain sector and its application under the Financial action Task force on specially the cryptocurrencies. The Brazilian Internal Revenue Service has published the updated rules for the tax on the cryptocurrencies. It is to be noted that the rules will be proposed in the meeting of G20 summit and it will be discussed till 2021 before implementation. The rules include that the cryptocurrency transaction over the 30,000 reals which is approximately $7600 will be reported in the monthly basis which strictly depends on whether the transaction is made through Brazilian currency or any other currency or the peer to peer exchanges.[26] Tax authorities in the Brazil have done their bit in regulating the cryptocurrencies in terms of cooling the market. The financial analyst and the experts have revealed that the aftereffect of these regulations is severe and it impacted in many sectors. According to Cointelegraph Brazil, it has been seen that the major cryptocurrencies specially on South America is shutting down amid the treats and the fines observed after the regulations. Many journals and the newspaper articles published about the rules on the tax Updata ion revealed that there has been significant decrease in the trade volume in market and the market is being cooled off for the smaller exchanges. The cryptocurrency exchanges in Brazil such as Latoex, Acesso has repeatedly blamed the condition that faced similar problems. The Brazil securities and the exchange commission also revealed that the companies that are facing problems are still looking at the 100,000 Brazilian real as fines if it doesn’t support suspension order issued by them. As the Brazilian rule don’t have the dedicated rules or law regarding the Cryptocurrencies, the entire areas of the exchanges fall under the Normative instruction number 1888 which is issued by the Department of Federal Revenue [27]. To add to the statement, it can be said that the special commission in Brazil also analysing and making the bills PL 3825/2019 and PL 3949/2019 and making revision of these two. But it is to noted that as per as the latest January, 2020 no such particular rules or the restriction has been made in the regulation of the cryptocurrencies.  The Central Bank of Brazil declared that the idea of the exchanges of the bitcoin is discouraged in Brazil because of the operational risks and from the 2017 onwards, there is no as such rules in Brazil to regulate Bitcoin. Local Exchanges are considered to be one of the great places to buy Bitcoin in Brazil while this great place comes with some challenges such as high transfer fees, transaction cost and the insufficient availability of it which makes the international exchanges more trustworthy. With the classification with the centralised and the decentralised exchanges, the purchasing will be held through the Brazilian Real and the international cryptocurrencies. The financial analyst of the Brazil revealed that different exchanges happen through fiat-to-crypto or the crypto-to crypto pairings payment methods as the different exchanges will facilitates different payment methods. The accounts of the exchange in the cryptocurrencies to access the capabilities of the exchange. In the bitcoin purchase method, the debit and the credit cards can be used while purchasing bitcoin or other cryptocurrencies can be used. Cryptocurrency wallet is mandatories to create the platform to the transactions of the cryptocurrencies this make the transaction secure and one can deposit the funds without being fraud and the cybercrimes. The department of the Federal Revenue of Brazil (RFB) are registered in the monthly tax purposes which includes the transfer amount and also the identity of the customers.[28]

A critical symposium on Bitcoin regulations in Switzerland:

Unlike the UK, cryptocurrencies are considered as legal tender in Switzerland. Exchanges of cryptocurrencies are also completely legal. The Swiss Federal Tax Administration is responsible for regulating all kinds of cryptocurrency exchange. Like Singapore, Switzerland to have adopted a progressive position in terms of dealing with the cryptocurrency-related regulations[29]. The SFTA regards Bitcoins as assets. Therefore, they come under Swiss Wealth tax and also annual tax returns should also be furnished. It is relevant tom point out those businesses of Bitcoins in Switzerland come under anti-money laundering legislation and in some cases a banking licence is required. On December 2013, a proposal was placed in the Swiss Parliament in terms of fostering digital sustainability. The proposal posits the government of the country in terms of elucidating the opportunity for effective utilisation of cryptocurrencies like Bitcoin by the financial sector of the country. The proposal has also sought clarification pertaining to the legal standing of the Bitcoin in reference to anti-money laundering laws, securities and VAT[30]. In response to the proposal, a report has been brought out by the Swiss Federal Council concerning virtual currencies.

Switzerland has framed an effective registration method concerning to the exchange of cryptocurrencies. In accordance with the registration method, business organisations involving in the exchange of cryptocurrencies need to acquire a licence from the FINMA to carry out the operation. In February 2018, a series of guidelines has been brought out by Swiss Financial market Supervisory Authority. All these guidelines have incorporated the existing legislation pertaining to finance. These guidelines range from security trading to collective investment schemes. The Government of the country has also nodded a motion in March 2019 that instructed the Federal Council in terms of adapting with the pre-existing legislation to encompass cryptocurrencies[31].

Juxtaposing Bitcoin regulations of the UK and Singapore, it can be said that there are a number of dissimilarities between the approaches taken by the two nations in terms of dealing with the exchange of Bitcoins. The approach adopted by Switzerland is progressive compared to the stance taken by the United Kingdom. While Bitcoins are not accepted as a legal tender in the United Kingdom, it is accepted as payment in Switzerland in some specific contexts. While Bitcoins are not regulated effectively in the UK, Switzerland has some specific legislations and guidelines in terms of dealing with the exchange of cryptocurrencies.

A critical symposium on Bitcoin regulations in Australia:

In Australia, Bitcoins are treated as legal. Furthermore, they are also considered as property. In Australia exchanges of cryptocurrency is also legal. However, like the UK and other developed nations, registration is compulsory in terms of dealing with the exchange of cryptocurrencies. Like Singapore and Switzerland, the country has adopted a progressive position while implementing cryptocurrency regulations. In 2013, the chief of the Reserve Bank of Australia provided an indication of legality stating pertaining to Bitcoin. In 2017, the government of the country has proclaimed Bitcoins as legal and specifically mentioned that Bitcoins should be considered as property[32]. Therefore, Bitcoins are also subject to capital gains tax of Australia. It is worth mentioning that earlier Bitcoins were subject to double taxation in accordance with the Goods and Services Tax of Australia. The remarkable transition in tax treatment validates the progressive stance of the government of the country in terms of dealing with the issue of cryptocurrency. Australia may not be considered as the biggest market for Bitcoin or the cryptocurrency but it has been ranked 14th globally as the biggest market in the volume of cryptocurrency. Although Japan sits on the top most position but Australia has been considered as one of the large players in the cryptocurrency market. Australia’s regulation portrays some trends because the country itself monitoring the customers and business engaged in the digital currency in order to avoid the money laundering and other fraudulent activities. With the increase in the number of digital transactions, importance of block chain technology and the increase in the number of financial tokens has made Australia as one of the greatest markets with the forward-looking digital currency strategy and policy framework modification.

In 2018, the Australian Transaction Reports and Analysis Centre have indicated the adoption of more effective and robust exchange regulations of cryptocurrencies. In accordance with the regulation of AUSTRAC, it is necessary to register with the organisation in terms of managing all kinds of cryptocurrency-related activities. The crypto regulations of Australia further emphasise on identifying and verifying users, adhering the reporting obligations and maintaining records. In Australia, unregistered exchanges of Bitcoins are considered as criminal offence and financial penalties are also imposed accordingly[33]. In May 2019, an updated regulatory framework pertaining to cryptocurrency issue has been brought out by ASIC (Australian Securities and Investments Commission). It talks about the essentiality of both trading of cryptocurrency and initial coin offering (ICOs). Needless to mention compared to the US and UK, Australia has set up a framework pertaining to the regulation of cryptocurrency. The latest regulations demonstrate the continued effort of the country to frame a clear and effective approach for Bitcoin businesses.

While the financial services watchdog of the United Kingdom has warned the prospective investors that cryptocurrencies like Bitcoins have “no intrinsic value”, Australia has managed to set up a proactive regulation in this area. Even some financial experts have also been assuming that the Government of the UK may even blanket a ban on the exchange of cryptocurrencies like Bitcoin. On the contrary, the RBA has clearly indicated that it has no intention to thwart people in terms of carrying out transaction in some other currencies. Moreover, the regulatory frameworks in Australia concerning cryptocurrency is more effective and mature compared to those of the UK and the US.

A critical symposium on Bitcoin regulation in Japan

The financial instruments and the exchange Act have defined that in Japanese Law, ‘The virtual currency’ is not been considered as a legal money. The financial instruments and the exchange Act have defined that in Japanese Law, ‘The virtual currency’ is not been considered as securities as per as the Japanese Law. The virtual currency is referred as the proprietary value that has been used in the time of exchange regarding the goods and services and which value may be transferred using the data processing software. According to Coin telegraph, the future of money on May 2019, the Japanese Law has amended two law related to Cryptocurrencies which is the payment services Act and The Financial Instruments and Exchange Act which estimated to come into effect in 2020. But the motive is to draw more institutional investors in the market of cryptocurrencies. On the other hand, other financial analyst has showed their concern regarding the amendments that has been brought regarding cryptocurrencies. The Payment Services Act (PSA) focuses on the virtual currency to crypto assets which is considered to be better than the virtual currency because this is regarded as the most used while in the international meetings [34]. Many analysts revealed that the custodian service providers may have to face the same level of risks in the financial markets same as the terrorism financing, money laundering. This brings the importance of the registration of the custodian with the Financial Service Agency (FSA). In some cases, the concept of the virtual currency often misleads public with the characteristics of the fiat currencies. Another issue that the user’s money will be hold by the third-party sources such as trust company and any other similar entity to use money separately from own cash flows. The management process ‘cold wallet’ has been considered as the reliable methods because in the ‘hot wallet’ system requires holding the same type and the same quantities of crypto assets which will allow the users to recover the funds gets stolen from the platform. The Financial Instruments and Exchange Act (FIEA) has taken the responsibility in introducing the concept of Initial Coin offering (ICO) and Security Token Offering (STO)[35] .

Challenges in Regulating Bitcoin

Nowadays, transaction of cryptocurrencies has sparked serious concerns concerning consumer protection, financing terrorism and criminal activities and money laundering. Owing to the increasing popularity of Bitcoin black market websites are spreading everywhere. By design, Bitcoins enable anonymous funding by acting as conduits for terror financing and money laundering. Owing to their volatile nature, the protection of the retail customer concerns exponentially. Since its incorporation, Bitcoin has remained unimaginably volatile. It is worth noting that Bitcoins have no physical existence either in the form of cash or gold bars. Consequently, regulatory jurisdictions remain much complicated[36]. Some experts argue that public-private key pair, pseudonym identifying may serve as a yardstick of regulation. However, some others have opined that carrying out such actions can be ineffective unless there is an effective de-anonymisation structure. Therefore, tracing the individual is not a very easy task, specifically with the dominance of remote servers. The identification of location has crucial implication for the purpose of cross-border payments. Since cryptocurrencies like Bitcoin facilitate instant transfers of lump-sum amount, irrespective of the emplacement of the payee and payer, the threshold concerning to allowable cross-border transaction might be different. Therefore, issues pertaining to taxation become more complicated[37].

Though the popularity of Bitcoin is having been increasing day by day, the absence of a centralised regulatory body is regarded as one of the crucial challenges in terms of regulating g the Bitcoin. The absence of clearly-defined code of conduct is also regarded as a major hindrance on the way of regulating Bitcoin. Besides, there are significant challenges in determining the legal status of cryptocurrency. While cryptocurrencies like Bitcoins are generally regarded as “currency”, the legal definition needs a currency to be issued, utilised and finally accepted by a nation[38]. However, in the case of Bitcoin, the situation is completely different. Another problem pertaining to Bitcoin is that not all nations have legalised their usage. Therefore, the non-uniformity pertaining to the legalisation of Bitcoin in different nation also appears as a key issue in terms of regulating Bitcoin[39]. Moreover, bitcoin is known to be a digital currency, which required high technology to use it in a proper manner and handle by proper law and ethics. However, there is lack of regulations as the governments are struggling with the legislation process and the fraudsters take advantage of the same. The fraudsters misuse bitcoins in the black market and for money laundering which would make them rich in the future and help them to make more money. As bitcoin is known to be a very useful cryptocurrency in the world, but the government tries to include stricter rules to protect bitcoin from the illegal activities have taken place in the country.

Notwithstanding on the web markets encouraging the exchange of bitcoin denominated subsidiaries, there are locales online that fill in as trades for portions of stock named in bitcoin. Incapable or reluctant to utilize conventional capital markets, a little yet developing number of business visionaries go to these trades to raise capital and sell stock in their organizations for bitcoins. Bitcoin-named stock trades have been tormented by visit tricks in which the necessary organization or concern is a lie, and there has been little response for financial specialists. These trades furnish people with more alternatives to gather pledges limited quantities of capital for intriguing ventures. The now ancient Global Bitcoin Stock Exchange is one of the most punctual known Bitcoin-designated financial exchanges. The first shut the trade for good on October 4, 2012. Like such a significant number of other first wave Bitcoin organizations, GLBSE was considered when Bitcoin was, to a great extent, a leisure activity or seen as a dream. Bit Funder was propelled in December of 2012 and permitted recorded resources for being purchased and sold utilizing bitcoins. Resources were openly recorded by Bitcoin address with the goal that investors and directors could all the more effectively reconnect on account of a trade shutdown. The originator of Bit Funder planned the trade in light of the exercises of GLBSE.

The Bitcoin regulation comes with the technological drawbacks which causes challenges in making the transactions. In order to avoid the technical glitch, the serious Bitcoin users create multiple accounts to avoid any kind of losses due to technical failure [40]. The technical challenges also create the area on the market for cryptocurrencies that needs to be regulated in order to ensure the clear transparency where the successive updates are required to generate the robust systems.  The question on the validity of the Bitcoin is generating through the high volatility of the currency which is also the reason that people are losing the trust on Bitcoin. Lack of the legal authorities and centralised body Bitcoin are opposed by many countries’ governments. According to[41], the absence of the regulatory body and increasing number of unethical fraudulent activities or hacking incidents making the financial system unstable. The best management and the understanding of the Bitcoin is needed because the black-market website for the Bitcoin is increasing and people have trust issues in order to accept the Bitcoin. The Federal Bureau of Investigation report 2012 revealed that the real identities of the user can be maintained by paying for the services for example web polishing. The challenges of the Bitcoin consist of describing or accepting it as the security, commodity or as the different digital currency. Most challenges that the Bitcoin regulations are faced because there exist non uniformities in the regulations of Bitcoin. Many countries have taken several steps to understand the risks and the guideline related to the Bitcoin to the investors and the users. Approximately six countries have restricted the Bitcoin use fully. The divergent pattern of regulation has resulted into more and more challenges in the process. Countries such as Russia, China, and Saudi Arabia have specified strong regulations against the digital currencies and took the robust and hostile approach towards Bitcoin. It is to be noted that, in Canada Cryptocurrencies are not been treated as the legal tender. On the other hand, Saudi Arabia has not banned bit coin yet but has not been taken the necessary measures in order to regulate Bitcoin while the United Kingdom has not clearly specified the clear guideline in the regulations of Bitcoin but restricted some areas of transactions. The Saudi Arabian Monetary Authority (SAMA) has reacted on the extensive use of Bitcoin and also warned the users on the high risks related to the Bitcoin and they specified that dealers will not get any protections of rights[42]. The areas such as public Law, Civil Law, consumer protection and the laws on the financial institutions require consideration. Bitcoin can be considered to be one of the kinds of the tangible and transferable properties and it can be treated as the valuable asset which can be transferred to another person if they accept the mode of payment[43]. The Bitcoin ecosystem is linked with the consumer protections which suggests that the concept and the use of the Bitcoin still lacks the consistency and legal resource to ensure the safety of these exchanges. To understand the documents and the guidelines related to the use and instruction of the Bitcoin. The regulations should focus on the country specific challenges and the guidelines and the safety or risk measures should be described permanently regarding the use of the Bitcoin. The desirable outcome of the Bitcoin regulations requires the proper administrative and legal managements and also tries to find out the linkage between the digital currency and the real currencies. The technologies related to the technology and the digital complexity needs to be evaluated continuously and to monitor the future risks to minimise the restrictions and the limitations. The advantages of the Bitcoin include the restricting the problems of the counterfeiting. At the time of buying something using the Bitcoin, the technological process ensures the transaction is valid by double checking the network and the ID’s. The risk of double spends attack when the transaction is made twice using the same account[44]. But various financial investigator teams have facing many challenges to identify the hackers, thieves engaged in the illegal activities related to the Bitcoin transactions.

Identification of Potential Market for Bitcoin

Bitcoin is the one of the types of Crypto currency in which the balances are kept using two special keys i.e. private and public ‘Keys’ which is made of mathematical algorithm consisting numbers and letters. It is to be noted that the word ‘Bitcoin’ in capitalized word is used when is describing the concept of the currency whereas the lowercase i.e. ‘bitcoin’ is the quantity of the currency[45]. The confirmed transaction under Bitcoin usually enters in the block chain. The market for the Bitcoin is quite large beyond receiving payment against the services provided. The wallet address and the QR Codes make the payment and the transaction facility even easier. The major portion of the Bitcoin users is self-employed people who can get the opportunity for the job in Bitcoin through several websites and online platform. Bitcoin are often used majorly in Gambling such as online lotteries, games, betting and jackpots[46]. The risks, opportunities and the transparency are still an ambiguous discussion and larger portion of the market don’t have the right and appropriate information about the use of bitcoin which creates confusion among the users. This digital currency is very much popular among the people who believe that digital platform of transaction is much faster and hassle free globally.

The potential market for the Bitcoin is mostly popular among investors and the traders who are quite interested in the fluctuation of the exchange rate against the dollar. As the special facility includes that the Bitcoin can be exchanged for traditional currencies, the investors ‘and the traders wait for the right time to invest in the Bitcoin which will provide them higher return. The special characteristics that includes in buying in low price and selling in higher is also true for bitcoin. The bitcoin can be hold as an inventory and the gains and the losses through bitcoin are often described as the capital gains and losses. But many financial investors and the analyst have pointed out the vulnerability of the existence of the market. It has been noted that many people purchase bitcoin for the value rather than the medium of exchange. The market for the bitcoin still considered being a risky market as the gains and the losses are pretty much depended on the purchase and the investment decision at the right time[47]. Some digital currency group like investors of the bit coin and the block chain companies revealed that the highest return and lowest risk investment decision can possibly make the investment worthy of the business. The market for the bitcoin is somewhat different than the stock market. Rather than tracking the sales target and the earning reports the bitcoin market focuses on some metrics like the total users measures by the number of wallets created or the units of circulation i.e. how many bit coins are currently in the market[48]. Many financial analysts opined that investing in bit coin is acceptable only when the investors are ready to lose.

Suggestive ways of Regulating Bitcoin

The regulatory framework for the bitcoin in the United Kingdom depends on the perimeter of regulation under the Financial Services and the Markets Act 2000 and the payment services and the electronic money regime under the Payment Services Regulation (PSR) Act 2017 and the Electronic Money Regulation (EMR) 2011. The concept of the crypto currencies and block chain need specific regulation regarding the effective use of the digital currencies. The suggestive ways of regulating the bitcoin effectively depends on forming the group of experts, policy maker and economist to analyze the various market reports[49]. Though the arguments are still persisting about the fact that the difference between the crypto currencies and the traditional currencies is prominent and some financial analyst revealed that this digital currency can destabilize the global financial market.

The law should be even stricter as the criticizing the bit coin the as the transparency and legal issues are always controversial as compared to the traditional money. In spite of the potential utility of bitcoin the underlining technology needs regulations. The unscrupulous, illegal activities sometimes take place through the crypto currencies, the regulations should be made in the regards of making the use even more beneficial[50]. The presence of the third party or the intermediates needs to be evaluated properly and in timely manner so that the potential risk factors and the vulnerability of using bitcoin can be mitigated. The transaction through crypto currencies including consumers and major business investment should be evaluated property for ensuring consumer protection, prevention of illegal activities, and market stability. The rules and regulations for Bitcoin should not restrict the technological innovation that could bring stability in the global financial market. The UK, particularly London, is viewed as a commonplace for money related administrations and new advances. Computerized money is a definitive cause of an account/innovation hybrid. The British open has indicated distinct fascination for advanced monetary forms – the London bitcoin meetup is conceivably the greatest on the planet, and various occasions and gatherings are being held in urban communities all over the UK. Britain is additionally home to a portion of the world's most popular bitcoin items and administrations. Despite this, the UK's administration and controllers have been amazingly tranquil regarding the matter of advanced monetary standards, and have left the improvement and reception of digital monetary forms to a great extent unacknowledged [51]. There are three zones of guideline to consider while analysing this subject: customer security; the avoidance of tax evasion, and tax assessment. Remote guidelines additionally have specific ramifications for those working in the UK[52].

Consumer protection

The Financial Conduct Authority (FCA), is the controller with obligation regarding guaranteeing that money related administrations are given in a manner that secures shoppers and keeps up the trustworthiness of the market. The FCA controls organizations that offer money related types of assistance or advance budgetary administrations (regardless of whether retail or wholesale). In the most recent year, various bitcoin organizations have moved toward the FCA looking for an explanation on the legalities of working bitcoin exchanges. However, the FCA has not offered any helpful direction or remark on the guideline of digital monetary forms [53]. The FCA has gone similarly as expressing it does not control computerized monetary standards and has no expectation of doing as such. The outcome is that bitcoin organizations in the UK are not obliged to enrol with or be approved by the FCA. The UK has an entrenched custom of self-guideline. Regardless of the controller's methodology, various bitcoin organizations have disclosed that they demonstration as per FCA rules. Without any conventional direction, organizations follow up on their own translation of what the standards should be. Thus, an extraordinary situation has emerged: rather than controllers pursuing organizations and hard consistence, UK organizations are pursuing controllers and demanding guidelines with which they can comply.  There was even one case where, supposedly, the FCA, on finding that a bitcoin business had figured out how to add itself to the FCA register, amiably welcomed that business to de-register itself.

Taxation

In the wake of accepting various solicitations from bitcoin partners about the VAT (esteem included assessment) treatment of bitcoin, HMRC started to give direction as a letter.  The direction expressed that bitcoin was to be treated as an only reason face-esteem voucher. This sort of voucher is, as the name recommends, redeemable for only a single-use. It implies at the time the voucher is gotten. It. It is known whether VAT is chargeable on the products or administrations for which the voucher can be recovered. HMRC in this way charges VAT on the acquisition of the voucher – they do not look out for the recovery. This implied that no UK trade could be both agreeable and severe. HMRC consented to pull back this direction and rethink bitcoin to perceive how VAT ought to be applied to it.  For once, UK organizations were glad to have no guideline. It was told that VAT would in all probability be charged on bitcoin administration charges, yet not bitcoin itself. Hence a trade would need to charge VAT on its bonus, however not on the bitcoins traded. HMRC is proceeding to consider how best to assess bitcoin and gatherings with partners are continuous [54]. HMRC is thinking about every single other part of tax assessment, not merely VAT. Ideally, it will see some improvement right now and a certain situation on how bitcoin organizations should represent charge.

Foreign Regulation

There is such a minimal guideline in the UK. It doesn't imply that outside laws don't influence UK organizations. Guidelines in the US have a propensity for coming to past the fringes of the 50 states. In the US, working a cash transmission business is controlled by the Financial Crimes Enforcement Network (FinCEN) at a government level, and afterwards again at the state level. To be agreeable all through the US, cash transmitters must consent to a wide range of client due to constancy commitments and keep up many costly enrolments in each state in which their administrations are accessible. FinCEN broadened the extent of this guideline to bitcoin trades and others purchasing and selling bitcoin or other advanced currencies. Unfortunately for UK organizations, this guideline has extraterritorial extension – it even applies to non-US organizations offering their types of assistance to US citizens [55]. Given the weight of conforming to US guideline, most UK organizations basically close their ways to US residents until they are prepared to venture into the US advertise and have adequate assets to attempt the consistence procedure. This includes geo-blocking US IP addresses, just as any obstructing any contact made through VPNs or TOR.

The absence of guideline in the UK has messed more up than open doors for bitcoin businesses. Unable to make sure of what guideline is not too far off and quick to maintain a strategic distance from future risk, bitcoin organizations frequently end up taking more administrative measures than managed businesses. On top of this is the most concerning issue confronting bitcoin in the UK – access to UK banking administrations. The electronic Frontier foundation which is a non-profit organisation first took the step to accept Bitcoin from January 2011 but stopped accepting it from June onwards after showing the lack of legal regulation in the new currency system.  From 2012 onwards people started to accept the digital currency and published many sources defining that there is no need of central bank in the regulation of Bitcoin which is absolutely digital. In August 2012, the plans were announced to launch the Bitcoin debit card through the Bitcoin transfer service called Bit Instant. With the administrative picture muddled, banks consider it too dangerous to even think about offering bitcoin organizations a ledger. In locales around the globe, officials and controllers are thinking about if and how to bring computerized monetary forms under their administrative frameworks. Meanwhile, the business people, who can't resist the urge to begin on their new organizations, are left rethinking what structure this new guideline will produce and what results it will have on their own specific business. Until the inescapable inquiry of guideline is settled, somehow, computerized cash organizations will be not able to arrive at their actual potential.

Research Methodology

The research study has adopted a qualitative research methodology to understand the current regulations of Bitcoin in the UK. The qualitative research methodology deals with the what factor as well as the why factors. It is considered to be the best method to collect the market research data through the open ended and the conversational communications [56]. This qualitative research methodology has been designed in such a manner that the behavioural aspects of the target audience can be captured through it. Various methods of qualitative study have been generally used in the research study i.e. the in-depth interview, focus group, case study research analysis, article and the content analysis etc.  However, this methodology, the subject matter can be evaluated in detail based on the observation. Thus, the information gathered from various sources can have a predictive quality operating within a research framework. The information has been collected from various sources like articles, books, peer-reviewed journals, case studies, and reports. The information has been collected by using stratified random sampling to higher precision. The chosen sampling method has helped the study to develop the study in order to achieve the goal and objectives of the study by minimizing the risk of error. Hence, it can be said that only the reliable and top data sources have been considered to develop the study further. Thus, these sources have categorized the entire population to help the study further to get the accurate result for the research study. The study has compared different cases and regulation of Bitcoin in a different jurisdiction to analyze the difference between the laws in other countries. Additionally, thematic analysis has been implemented on the study to analyze the information by generating themes, also has developed a clear picture of the subject matter.

Effectiveness of the research

Following the above discussion, it can be said that the UK government aims to protect and investors, preventing them from money laundering, but still, it needs to explore whether the cryptocurrencies that are characterised with specified investments can be captured with the regulation or not[57]. This nation has initiated a Call for Information to maintain its position as the top financial centre within Europe. It has investigated the risks as well as the benefits that can be posed by cryptocurrencies during signalling any changes in regulation. However, there is a need for more appropriate regulation. It is expected that such regulation would ensure specific measures for investor compensation and consumer redress along with anti-money laundering cases. Both the UK government and FCA need to share the same concerns and focus on crypto-assets, in turn, keeping a close eye on the impact of lack of regulation on consumer protection and money laundering issues[58]. This research study provides the scope to understand further about regulatory challenges and whether there is any need to change the existing framework. For now, the discussion reveals that new regulation providing consumer protection with regards to anti-money laundering needs to be developed. Such regulation would also provide regulatory oversight, in turn, would also ensure consumer safety and guard against any malpractice.

Discussion and Analysis

The action related to the speculation must be a "controlled action." The initial phase in the "venture" examination is whether an instrument falls The second step in the "speculation" investigation is whether a movement is a "directed action." speculations, organizing bargains or overseeing speculations, and setting up Essentially, Brazil's meaning of "security" is progressively comprehensive in view of its class for "speculation contracts" has less prerequisites. In 2001, Brazil classified the into its Capital Market Law, as opposed to building up the test through prosecution.  The Brazilian Capital Market Law gives the accompanying classification: when openly offered, some other aggregate venture instrument or agreement that makes the privilege of interest on benefits or compensation, including those subsequent from the rendering of administrations, and whose benefits get from the endeavours of the business person or from the endeavours of any outsiders." The FIEA gives a not insignificant rundown of value and obligation instruments, which are regularly known as securities.so The FIEA additionally incorporates a general classification that may take into account Bitcoin guideline. This classification recommends that, when considering different factors, for example, liquidity and the degree to which a specific novel instrument has comparable monetary qualities to those protections recorded inside the FIEA, the Japanese Cabinet may decide to manage a "right" as a security on the off chance that it esteems that such guideline is "important to make sure about the open premium or the insurance of speculators. Bitcoins take after ventures in light of most by far of action in the Bitcoin showcase includes the development of bitcoins through financial specialists and merchants on Bitcoin trades, and this action depends on the law concerning Bitcoin's fluctuating business sector cost. Furthermore, Bitcoin liquidity is very constrained because the whole framework is planned so that there will ever be a sum of 21 million bitcoins available for use. This restricted liquidity implies that Bitcoin shoppers cannot serenely sell their requests at a known or unsurprising cost. This way, it offers that could drive down the entire market cost for bitcoins. Because of Bitcoin's illiquid nature, which may offer ascent to critical value vacillations, the Japanese Cabinet may esteem Bitcoin guideline important for the insurance of financial specialists. In the year 2013, the German Finance Ministry has identified Bitcoin as the unit of the account. But the announcement of Bitcoin regulation made the fluctuation between 11-15% and the crypto currency world has been expanding from 2017 and its market hosts around 2000 digital currencies and still it has been increasing day by day.  Bitcoins are the form of the electric money which has only the existence in the virtual cloud. Owning a Bitcoin comes with having a unique address to make the transactions and the address are the long series of randomly generated alphabetic character. The private digital keys registered with each user are considered to be very important in order to make the secure transaction. The private key would save the user money from stealing any bitcoin from individual account. The bitcoin wallet keeps the tracking of the individual all addresses in order to make transaction in less time and much faster way. In the most recent year, various bitcoin organizations have moved toward the FCA looking for an explanation on the legalities of working bitcoin exchanges. However, the FCA has not offered any helpful direction or remark on the guideline of digital monetary forms as the FCA has gone similarly as expressing it does not control computerized monetary standards and has no expectation of doing as such. The outcome is that bitcoin organizations in the UK are not obliged to enrol with or be approved while sending a bitcoin, the entire network should be aware of the transaction in order to maintain a successful transaction. The people put values to the Bitcoin and the status of entire Bitcoin network can be hold under the system named blockchain network. The Block chain network is said to be the platform where the information related to the bitcoin transactions are recorded for example the sender, receiver, amounts which helps the users to protect their bitcoin from any unethical hackers and to protect the system from any counterfeit information [59]. After the Financial crisis of 2008, the analyst and the financial experts has forecast about the future financial market and identifies the importance of the client portfolio and the proper allocation of the resources which further opened the opportunity for the investor to identify the alternative investment opportunities. The financial survey after the economic depression has showed that around 73% investors believes in the alternative investment opportunities while the rest revealed that the people are not into grabbing the alternative investment opportunities. The financial analyst and the advisory have stated that 6-15% of the client’s portfolio would be held in the alternative investments on the other hand some of the investors are revealing that the client portfolio in alternative investment should be 16-26%[60]. The Bitcoin is the one of the parts of the cryptocurrencies and as the aggressive investors they look at the other cryptocurrencies rather than Bitcoin. The Blockchain projects also involves banks with the cryptocurrencies like ETH (Ethererum), XRP, Ripple Labs etc [61].

The investors all around the world considered that the value of the bitcoins is often volatile, and it possesses the complex mechanism of uses which makes it difficult for the investors to adopt this digital currency in the markets. As the technology is spreading very fast and the bitcoin and its application is constantly changing. The high exchange rate indicates that the Bitcoin is going to capture the larger share of the market. The software for the bitcoin is describes as the mining software such as ASICs and FPGAs[62]. There are many bitcoin mining soft wares in the markets such as Multi miner, BFG miner, Bit miner, Combiner, easy miner, awesome miner, easy miner etc. the cryptocurrencies are often considered as the risky investment because the investors can lose the money entirely that he invested and thus it is one of the risky investment alternatives. The experts revealed that the cryptocurrencies are more like gambling and there is similarity like putting money in the stock markets which creates the importance of the risk management also. The value of the cryptocurrencies can go up and frequently go down depending on the market conditions. The bitcoin reserve is also considered to be the hedge fund which is also known as the arbitrage fund as the strategy become important in this case because the crypto currencies follows different prices across the world and the price differentials has the impact in the markets to make itself the most accessible funds. It is worth mentioning that earlier it has been proposed by the regulatory body that some investment associated with cryptocurrency should be banned in order to secure the interest of the retail investors and it is worth mentioning that Bitcoins along with some other cryptocurrency have been causing many headaches for the regulators of the United Kingdom. Bitcoin has the relation with the stock markets and the Bitcoin-named stock trades have been tormented by visit tricks in which the necessary organization or concern is a lie, and there has been little response for financial specialists. These trades furnish people with more alternatives to gather pledges limited quantities of capital for intriguing ventures. The now ancient Global Bitcoin Stock Exchange is one of the most punctual known Bitcoin-designated financial exchanges. The Brazilian Internal Revenue Service has published the updated rules for the tax on the cryptocurrencies. It is to be noted that the rules will be proposed in the meeting of G20 summit and it will be discussed till 2021 before implementation whereas the cryptocurrencies are considered as legal tender in Switzerland. Exchanges of cryptocurrencies are also completely legal as the Swiss Federal Tax Administration is responsible for regulating all kinds of cryptocurrency exchange. The UK, particularly London, for money related administrations and new advances. Computerized money is a definitive cause of an account/innovation hybrid. It is to be noted that the British open has indicated distinct fascination for advanced monetary forms – the London bitcoin meetup is conceivably the greatest on the planet, and various occasions and gatherings are being held in urban communities all over the UK. Britain is additionally home to a portion of the world's most popular bitcoin items and also the related administration. Bitcoins is considered to be the anonymous currency while the virtual currency is related with the larger amount of transfer and the exchange of every details between the transferrer and the receiver and it also focuses on the chain and which can be tracked in the process [63]. As the bitcoin has the unique serial numbers i.e. public key cryptography that is used to identify the ownership of the bitcoin and the details of the transfers. Many financial experts and the bitcoin analyst revealed that the serial number for the bitcoin is not included in the stable serial number and in the transaction the transferee receives the unique hashtags which is generally considered to be the output of the previous transaction. The impotence of the currency lies in the fact that the existence of the virtual currency lies in the protection and the security that the consumers feel while making transactions using Bitcoin. 

Bitcoins do have some drawbacks or the disadvantages that makes it a risky affair to deal with. The more people are concerned about the money they invested might be the victim of the theft while making the transactions. The most dangerous point lies in the contract of exchange at the time selling of the coins. It is to be noted that the bitcoins are sometimes considered as the secured ways of payment as the online websites and purchases and the challenges lies in the human error [64]. In a report published on the 2013 by the Cornell University stated that the system of the virtual currency can be broken when the algorithm used in the bitcoin mining can be exploited by the team of the selfish miners which brings enough theft.  In some countries, specially the United states have come forward in order to track these miners who are using consumer data for the illegal purpose and engaged themselves in the fraudulent activities. It is to be noted that the exchanges face major problems as reported in the 2014, the bitcoin service Flexcoin was robbed as well as attacked because the coins in the hot wallet has been stolen[65]. The regulation in this case become very important and Gold in the past was also has the history of the absence of the regulations. As there are no legal rules in the virtual currency transactions but there are rules against hacking. The hacking regulations is simpler in the case because bitcoin is not money and the online regulations can be easily tracked by many soft wares and the bitcoin thief can be tracked using the tracking software in the market.        

Future Recommendation

The Bitcoin is one of the most successful cryptocurrencies globally that does not regulate by the central government and brings in development of the blockchain by adding more security to it. The Bitcoin has the largest value among the other crypto currencies in the market, thus, it seems that there is a bright future of Bitcoin to bring revolution in the traditional monetary system[66].People also expect that the Bitcoin could be the only mode of transaction globally[67]. Therefore, the country regulations and laws should be stricter to prevent frauds, money laundering and protect the investors and people from being in trapped among the fraudsters.

In the traditional financial market where the people are engaged in the trading of the securities and derivatives in minimum transaction cost, the liquidity and the volatility have been considered as the important factors[68]. The macro level investigation on crypt currencies and the poll related to it revealed that Bitcoin will eventually become the most traded digital currency and would make a place in the traditional commodities in real term but the timings matters the most as the level of maturity would depend on the times as the other commodities in the market. On the other hand, the venture capital specialist firm revealed that the lack of supply as compared to the demand will create the fluctuations in the financial markets in the upcoming future. The Arcane research has shown that the premium for the bit coin futures increased from the 30% but the Bitcoin price has dropped around 6%. Though the futures of the bit coins look like promising in the future but the limitations on technology and the legal instructions are making a controversial market for Bitcoin. The technological innovations and the development process would lead to the value and the demands of the markets to increase and that would make the crypto currencies as the most used tag as digital currency[69]. Bitcoin has the capacity to become the primary payment medium coupled with the concern over the technological limitations and the difficulties faced in the transaction process.      

The virtual currency transaction is the central of the regulation of the bitcoin and the regulation may exist as a form of the commodity and that should be regulating the speculation of the trivial value. The adaptation of the market on the virtual currency become important because then only the regulations of the virtual currency become effectives.  It is to be stated by many analysts that the Bitcoins regulations are mandatory in these cases when the recent price bubble of bitcoin requires development. The necessary solutions should be on the entire virtual currency which will eventually lead to the protections of the bitcoin in general. There exists also the importance of the public ledgers in the regulation matter of Bitcoin and other cryptocurrencies and it can be sometime said that the virtual currencies can be present without the public ledger but in this current scenario the importance is very much vibrant. [70]These public ledgers can be used as the catalyst in the law enforcement process by helping in keeping the record of every transactions including the virtual currencies. These public ledgers can bring back the law enforcement and the investigation of any kind of the abnormalities create the more transparent regulatory system. The know your customers better facilities for the virtual currency firms can make the process even more trustworthy.

Conclusion

To sum up the above discussion, it can be concluded that Bitcoin has the opportunity to be the only digital currency that regulates in the market and all the transaction would take place with Bitcoins only. There are various risks that will occur while investing in Bitcoin such as taxation risk, investment risk, security and regulatory risk, etc. Though the financial market in UK is stable and the existing cryptocurrency market is way smaller, the demand of Bitcoin in the market is high. Therefore, the laws and regulation need to be stricter to protect the investors from facing issues and fulfilling the regulatory gaps in UK. There are laws and regulations on Bitcoin available that are different from the other countries. However, it is known that Bitcoin are valuable and the more people accept Bitcoin for transaction purposes the more value of the Bitcoin will increase. The risks, opportunities and the transparency are still an ambiguous discussion and larger portion of the market don’t have the right and appropriate information about the use of bitcoin which creates confusion among the users. This digital currency is very much popular among the people who only keep the believe that digital platform of transaction is much faster and hassle free globally. There exist also the technical challenges as the technology is evolving each day and the technical challenges also create the area on the market for cryptocurrencies that needs to be regulated in order to ensure the clear transparency where the successive updates are required to generate the robust systems.  The question on the validity of the Bitcoin is generating through the high volatility of the currency which is also the reason that people are losing the trust on Bitcoin. Lack of the legal authorities and centralised body Bitcoin are opposed by many countries’ governments. The futures of the bit coins look like promising in the future but the limitations on technology and the legal instructions are making a controversial market for Bitcoin globally.

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Footnotes

[1]Baur DG, Hong K and Lee AD, “Bitcoin: Medium of Exchange or Speculative Assets?” (2018) 54 Journal of International Financial Markets, Institutions and Money 177

[2] Hongki Kim, 'Bitcoin Regulation: Legal and Regulatory Issues of The Virtual Currency System' (2014) 15 The Korean Journal of Securities Law.

[3] Fetisova T.V., 'Economic and Legal Issues of A Bitcoin Actual Paradigm, or Bitcoin: Listen, If Stars Are Lit It Means - There Is Someone Who Needs It' (2018) 3 KnE Social Sciences.

[5] Julia Kollewe, ‘Bitcoin Could Be Overseen by UK’s Financial Regulator’ (The Guardian, 2018)

<https://www.theguardian.com/technology/2018/dec/20/bitcoin-may-be-overseen-by-uks-financial-regulator>

accessed 20 March 2019.

[6] Rodney Garratt and Neil Wallace, 'BITCOIN 1, BITCOIN 2, ....: AN EXPERIMENT IN PRIVATELY ISSUED OUTSIDE MONIES' (2018) 56 Economic Inquiry.

[7]'Regulation of Cryptocurrency around the World' (Loc.gov, 2020) <https://www.loc.gov/law/help/cryptocurrency/world-survey.php> accessed 3 January 2020.

[8]Reyes, Carla L., ‘Moving Beyond Bitcoin to an Endogenous Theory of Decentralized Ledger Technology Regulation: An Initial Proposal’, Vill. L. Rev., 61 (2016): 191.

[9] M Sharmila Devi, 'Bitcoin – An Overview' (2019) 7 Shanlax International Journal of Commerce.

[10] Bhattacharjee S, and Kaur H, 'An Overview of Alternative Currency: The Bitcoin' (2015) 9 Indian Journal of Finance

[11]'Bitcoin Has 'No Intrinsic Value,' As U.K. 'Moves Towards' Crypto Ban' (Forbes.com, 2020) <https://www.forbes.com/sites/billybambrough/2019/08/01/Bitcoin-has-no-intrinsic-value-as-uk-moves-towards-crypto-ban/#296e302a2d27> accessed 26 February 2020

[12]Davies R, 'FCA Proposes Ban on Cryptocurrency Products' (the Guardian, 2020) <https://www.theguardian.com/technology/2019/jul/03/fca-proposes-ban-on-cryptocurrency-products> accessed 26 February 2020

[13]Wonglimpiyarat, J., ‘Bitcoin: The revolution of the payment system? (2016) 9 Journal of Payments Strategy & Systems 235

[14] Shynkevich A, 'Bitcoin Futures, Technical Analysis and Return Predictability In Bitcoin Prices' [2020] Journal of Forecasting

[15]'UK Law Panel Defines Crypto Assets as Property - Coindesk' (CoinDesk, 2020) <https://www.coindesk.com/uk-law-panel-defines-crypto-assets-as-property> accessed 26 February 2020

[16]Horsman, G., ‘The challenges surrounding the regulation of anonymous communication provision in the United Kingdom’. 56 Computers & Security 157

[17]Kollewe J, 'Bitcoin Could Be Overseen by UK's Financial Regulator' (the Guardian, 2020) <https://www.theguardian.com/technology/2018/dec/20/Bitcoin-may-be-overseen-by-uks-financial-regulator> accessed 26 February 2020

[18]Boon Seng Tan and Kin Yew Low, ‘Bitcoin - Its Economics for Financial Reporting’ (2017) 27 Australian Accounting Review.

[19] Anastasia Sotiropoulou and Dominique Guégan, 'Bitcoin and the Challenges for Financial Regulation' (2017) 12 Capital Markets Law Journal.

[20]DeVries, P.D., ‘An analysis of cryptocurrency, Bitcoin, and the future’ 1 International Journal of Business Management and Commerce 8

[21]Wisconsin Central Ltd v United States [2017] SUPREME COURT OF THE UNITED STATES (SUPREME COURT OF THE UNITED STATES)

[22]Brito, J., The law of Bitcoin. (iUniverse 2015)

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[26] Carlos Trucíos, 'Forecasting Bitcoin Risk Measures: A Robust Approach' (2019) 35 International Journal of Forecasting.

[27] Lan Ju, Timothy Jun Lu and Zhiyong Tu, 'Capital Flight and Bitcoin Regulation' (2015) 16 International Review of Finance.

[28] Hossein Nabilou, 'How to Regulate Bitcoin? Decentralized Regulation for A Decentralized Cryptocurrency' [2019] SSRN Electronic Journal.

[29]Kondova, G. and Simonella, G., ‘Blockchain in Startup Financing: ICOs and STOs in Switzerland’ (2019) 14 Journal of Strategic Innovation and Sustainability

[30]Kondova, G. and Simonella, G., ‘Blockchain in Startup Financing: ICOs and STOs in Switzerland’ (2019) 14 Journal of Strategic Innovation and Sustainability

[31]Chuen, Handbook of digital currency: Bitcoin, innovation, financial instruments, and big data (Academic Press 2015)

[32]'Australia Among First to Introduce Bitcoin Regulations' (Australian FinTech, 2020) <https://australianfintech.com.au/australia-among-first-to-introduce-Bitcoin-regulations/> accessed 27 February 2020

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[36]Hazar, H.B., ‘The importance of regulations on cryptocurrency transactions’ (2019) 1 SOCIAL SCIENCES, MANAGEMENT AND ECONOMICS JOURNAL

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[54] Gina Pieters and Sofia Vivanco, 'Financial Regulations and Price Inconsistencies Across Bitcoin Markets' (2017) 39 Information Economics and Policy.

[55] Lan Ju, Timothy Jun Lu and Zhiyong Tu, 'Capital Flight and Bitcoin Regulation' (2015) 16 International Review of Finance.

[56] Michael Smyth, 'Reconceptualizing Qualitative Research: Methodologies Without Methodology, By Mirka Koro-Ljungberg' (2016) 13 Qualitative Research in Psychology.

[57]Kollewe J, 'Bitcoin Could Be Overseen by UK's Financial Regulator' (the Guardian, 2018) <https://www.theguardian.com/technology/2018/dec/20/bitcoin-may-be-overseen-by-uks-financial-regulator> accessed 2 March 2020

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[60] Maria Letizia Perugini and Cesare Maioli, 'Bitcoin: Tra Moneta Virtuale E Commodity Finanziaria (Bitcoin: Between Digital Currency and Financial Commodity)' [2014] SSRN Electronic Journal.

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