Unlike fiat currency, a public ledger reveals the history of Bitcoin transactions. This is both a blessing and a curse, which can be used either positively or negatively. There has been some talk over the years that perhaps Bitcoin might succumb to a grading system, similar to gold, which is graded according to purity. The transactional history publicly viewable on the blockchain ledger is able to reveal whether the coins in question have been used in any illicit activity. If so, this would ultimately incur a negative or bad rating.
The “purest” Bitcoin will obviously always be in the form of mining rewards. Freshly generated BTC, coming straight from the network has no transactional history and therefore has the highest grade of purity.
You Could Be Using “Blood Money”
This is however not seen in any way, shape, or form in the world of fiat. Nobody knows the history of a dollar bill and quite frankly, nobody really cares. You have most likely used dollar bills throughout your lifetime that were once used to finance a crime, or even stolen. Nobody knows the history of any of the notes in circulation and nobody ever will. However, the opposite is true of Bitcoin. Everyone is able to know the transactional history if they so choose. The information is public and transparent but still private to some extent, as identity is not necessarily associated with the public address.
Something I read the other day concerned me a great deal because it was the first case I had heard of in regards to what I have just mentioned. Even though the story might not necessarily be true, it is quite possible that this type of system could be adopted by certain institutions and companies.
BTC Rejected Due To Past Activity
I read a story of someone who had taken out a loan with one of the more credible and reputable Crypto lending platforms. The price of BTC proceeded to dump shortly after he had taken out the loan, which triggered automated messages to fund his account. After depositing BTC, he was informed that his deposit was declined due to the BTC in question previously being put through mixers. I can understand the red flags that mixers trigger but that does put innocent people at risk.
A Probable Scenario
Someone who uses mixers and later spends their coins will most likely make an online purchase. This action will then cause an innocent business to take possession of “questionable” coins. The business merely supplied a legit service and received payment, they are by no means responsible for any illicit or criminal activity. The fact that those coins could then in turn later be rejected is quite devastating.
I guess the point I am trying to make is that unless the mixing was done directly before the spend, one cannot simply pass judgment and penalty on an innocent person. What if you were refused due to the fact that your paycheck came from a company that had just been caught laundering money? Is that fair? Are you part of their criminal empire? No, you simply work for the company and collect a paycheck every month.
An understandable and accurate regulatory framework is something that will take a long time to establish. At least this is my opinion, especially when I look at how matters have been handled up until this point. There is a massive void when it comes to understanding the mechanics of blockchain technology within regulatory bodies. This is a global issue and yet more predominant in certain parts of the world.
In my opinion, regulation should have never been initiated without first forming a basis of knowledge and understanding. How can any regulatory body regulate something that they do not understand? It is actually a recipe for disaster! Not only do regulators need to have a firm understanding of blockchain technology but they also need to have a firm grasp of the entire Crypto space.
Regulation Is A Given
Regulation is not going away, which is why it is better that those who impose laws have a thorough understanding. Can you imagine how disastrous it will be to have uninformed individuals passing laws on something they have no clue about? I am still hoping for the best but am also prepared for a difficult road ahead. The path to clear and concise regulation will be a long and difficult journey.
There need to be realistic and acceptable regulations in place. Choosing to reject coins based on past activity is not a black and white scenario. I am hopeful that this will not become an issue, as there are numerous constructive approaches that can be taken in a similar situation like the one I highlighted earlier in this article. Further regulation is on the way, here’s hoping it is realistic and acceptable. It will most likely be rather challenging but if it is within the bounds of understanding it will be easier for Crypto users to embrace.