In a recent event, CoinCheck Inc., the primary cryptocurrency exchange used in Japan, had been the victim of an alleged hacking in which the company had lost over $530 Million worth of funds. Due to an oversight in security measures, the Japanese government is now ushered to impose stricter policies over the cryptocurrency exchange in order to prevent further losses for both cryptocurrency companies and investors.
Despite the desire of governments to regulate cryptocurrency, they are currently stumped as to how to do it. The bigger question, however, is if they do impose any kind of regulation on cryptocurrency trading, will it be effective against heists?
Let us take for example our current banks who impose different types of security in order to secure transactions with their customers; despite the latest technology systems used by tellers for their transactions, there are still numerous attacks happening every year.
Forgeries and inside jobs are often the reasons why banks have trouble, and the governments, no matter how strict they are with imposing sanctions, have no power to stop the people who initiate these crimes; they can only try to prevent them until the next plan is hatched into fruition.
But the biggest problem of imposing regulations on cryptocurrency transactions is this: how will they manage to monitor a thing that does not have any physical presence?
We must consider that a person can mine cryptocurrency from thin air; as long as their computer manages to solve the algorithm, the server automatically gives them their reward. The “how” on the regulation to ensure that the person is a legitimate earner and not a future heister who is simply trying to crack the pattern for coding is hard to answer.
Another “how” is on physical to virtual transactions; currently, it is very hard for cryptocurrency transactions to be traced despite coin wallets having unique numbers because they can be generated repeatedly to protect the receiver’s identity. If this problem is not solved, it could lead to government overreach.
Regulations, despite many governments’ best efforts, will only serve as a temporary barrier to future attempted attacks. Deterrents are not the best solution. What must be done is to update security protocols in order to prevent future heists, just like what Coinbase regularly does, but that leads us back to the worry about centralization in a decentralized environment…
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