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Though the use of Bitcoins has many advantages, some states are now considering regulating it. If a company wants to operate with the use of Bitcoins, some states may now have to ask them to submit a formal application. This move is done after the collapse of a recent Bitcoin bank that has been hacked and the users lost a considerable amount of Bitcoins. As of now, the government is paralyzed because the Bitcoin software is not under its jurisdiction. In as much as the government wants to intercede, it does not have the capacity to protect the Bitcoin users.
The Central Bank is keen on regulating the Bitcoin software in order to thwart any suspicious financial transactions. It specifically targets the vending machines or the automated teller machines that dispense Bitcoins. The consumers are attracted to the Bitcoin software because the government is not part of the picture, hence, their money will not be taxed.
However, by not involving the government, the Bitcoin users become vulnerable to the sudden fluctuations of the Bitcoin exchange rates. Plus, just like in the case of the Flexcoin Bank and the Mt. Gox where the Bitcoin users had no one to turn to but just accept the fact that they have lost their investments in Bitcoins. The government cannot help them bring back their lost investment, since those Bitcoins have no insurance.
In Singapore, Bitcoin exchange might also be regulated by the government. This move by the government is to prevent the potential use of Bitcoins in money laundering and terrorist activities. It is very easy to transfer funds from one to the other with the use of Bitcoins. Add to that the fact that there is no limit when it comes to sending and receiving Bitcoins. In Singapore, the identities of the users will have to be verified before finishing a transaction and if there are any suspicious transactions, the police will be notified immediately.
There are more and more countries that are calling for the regulation of Bitcoin exchange because it is becoming a medium for illegal trades and activities. Countries such as China, United States of America, and Russia are countries that are being scrutinized. There are suggestions like limiting or totally banning Bitcoin exchange.
In Tokyo, the government issued a statement that the use of Bitcoins should be taxed based on income, corporate and consumption laws. This news was announced after Mt. Gox, the world's largest Bitcoin exchange, filed for bankruptcy. Theft from hacking is the cause of the downfall and Mt. Gox announced that they lost 750,000 Bitcoins or 2.8 billion yen.
The users will not be able to get back their Bitcoins and the government of Japan cannot intercede for them because it is not yet regulated. Thus, the Japanese government is serious about the regulation of Bitcoins in order to prevent unscrupulous activities and to protect the investors.
By regulating the Bitcoin, the illegal activities like drug money transfer and terrorist funding may be aborted.
Source (https://bitcoinexchangeguide.com/bitcoin-exchange-regulation/)