Investigation Into Regulatory Challenges Faced by Bitcoin in Comparison with the US Dollar

Investigation Into Regulatory Challenges Faced by Bitcoin In Comparison with the US Dollar
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1.0. Introduction
Since its adoption peaked, the crypto market has become a breeding ground for controversy. The regulators are concerned about the unique nature of anonymous transactions within this newly-found alternative to traditional finance (Chen, 2021). Notably, the number of cryptocurrency users worldwide has crossed 420 million as of 2023, with 90% trading in Bitcoin (making it the most frequently adopted cryptocurrency) (LinkedIn, 2023). Therefore, it is no surprise that Bitcoin often remains hotly debated from its regulatory perspective (Motsi-Omoijiade, 2022). While the opponents of peer-to-peer trading are critical of the non-application of Anti-Money Laundering (AML) and Know-your-Customer (KNY) related provisions on Bitcoin's trading and demand a transparent system that simulates the regulatory coverage for traditional institutions, the proponents of unregulated crypto market argue otherwise (Corbet, 2021). The supporters of the permissive approach believe that the regulatory restrictions are likely to affect the unique nature of transactions, deter innovation, and affect the participation rate (Motsi-Omoijiade, 2022). These controversies and polarization around them also reflect on the global scale as a few countries, such as China, have already blocked Bitcoin, and some want to regulate it. In contrast, others (mainly Western countries) have begun to regard Bitcoins as Crypto-assets with minimal focus on changing their regulatory status (Motsi-Omoijiade, 2022).
On the other hand, the USD is an adequately regulated currency and is supposed to comply with traditional regulatory obligations. The institutions, such as Banks and trading platforms, facilitating the exchange of USD are also under the conventional regulatory framework (Baur et al., 2018; Oniha & Sanchez, 2020). The comparison between USD and Bitcoin is based on the realization that USD is a competitive conventional market alternative to Bitcoin with widespread adoption, easy accessibility of data, and high visibility.
The paper starts from a broader perspective as the initial part deals with the historical overview of Bitcoin, focusing on key controversies that drew regulatory attention. It is followed by the main part of the discussion, which is the comparison between Bitcoin and USD, focusing on different regulatory aspects, with each aspect treated as a separate theme and discussed under an exclusive heading.
2.0. Historical Background
The peer-to-peer electronic trading system termed Bitcoin commenced in 2008 through a White-Paper, and the mining started with a book traded using Blockchain technology in 2009. From 2009 to 2013, its adoption grew exponentially, but the regulators remained skeptical and unsure about different regulatory options proposed for the Crypto market. There was a lack of seriousness at the regulatory level because the administrative cost of regulations may outweigh any benefits as the adoption was not as ubiquitous as to merit an active intervention (Motsi-Omoijiade, 2022).
A major incident occurred in 20...