Is Cyptocurrency a Form of Gambling
They're called "cryptocurrencies" in popular lingo, but Bank of Canada Governor Stephen Poloz has a different name.
"They are crypto but they are not currencies," Mr. Poloz said recently. "I'm not really sure what they are…. It's just essentially speculative or gambling."
No one yet knows what to make of bitcoins and the more than 1,300 other digital currencies now in existence. Countries around the world are struggling to regulate them – a difficult task because they have no relationship to national geography or sovereignty, and they bypass all the usual banks, exchanges and clearinghouses. They are a tax shirker and money launderer's dream.
A few smaller countries have banned them. China tolerates them but has outlawed banks from accepting, using or selling them. The European Central Bank has warned against their use, while the U.S. Securities and Exchange Commission is struggling to keep a check on them.
As it happens, Canada became one of the first countries in the world to enact legislation on digital currencies, when they were included in a 2014 money-laundering bill.
Ottawa has since used a lighter touch than other places, regulating cryptocurrencies as it would foreign currency exchanges or wire transfer companies, and in some cases treating them as securities.
That's a bit worrying. The world market for digital currencies is growing exponentially and becoming incredibly volatile. Foolhardy investors could lose their shirts.
It's also the Wild West in terms of consumer protection; last week, $500-million in digital "coins" vanished from a Japanese cryptocurrency exchange.
The best hope for managing the dangers of a phenomenon that is akin to gambling lies in reaching a global consensus on, for example, making it illegal to convert digital currencies into recognized legal tender. But that only works if everyone does it.
In the meantime, the most effective tool may be Mr. Poloz's tack. He should keep calling digital currencies by their most apt name – "gambling" – so that potential investors are scared off.
Reference - Globe and Mail
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