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Challenges of Existing Financial Systems for virtual currency

Representative tasks of the existing financial system that led to the emergence of virtual currencies are mainly pointed out by the high-cost structure of international payments and remittances, financial exclusion, and regulation of money flow.

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As international capital flows expand on the back of increased transboundary movements and globalization of the real economy and financial system, the need for a stable and cost-effective international payment and remittance system is also increasing. Although traditional banking and remittance systems have networks around the world, international payment and remittance costs are still high. Virtual currency can be seen as one of the alternatives to solve this high-cost structure

New Challenges and Policy Responses

Virtual currencies solve the challenges of existing remittance and payment systems, while also creating new ones. Specifically, firstly, it may be used for the settlement of illegal activities such as money laundering or terrorist financing. Second, vulnerability to user protection. Third, the possibility of taxation problems  bonus bitcoin such as tax evasion and double taxation. Fifth, the possibility of disrupting the operation of the policy Fifth, there are concerned about the weakening of the effectiveness of the monetary policy.

Regarding the above misconduct, it has been pointed out that the use of Bitcoin for payment of information transactions for misconduct on the e-commerce website called Silk Road is an issue that anonymity encourages misconduct. In terms of user protection, a symbolic example of the Mt. Gox representative, the world’s largest Bitcoin exchange at the time, took over the funds deposited by customers. About taxation, there is a concern that tax evasion is likely to occur due to the anonymity of virtual currencies, the absence of authorized agencies, and the ease of cross-border transactions