With investors increasingly appealing to major cryptocurrencies such as bitcoin and the growing range of associated financial products, regulators are finding themselves in a race to set new rules to trade in a fast-growing world.

Financial sector officials recently appointed by US President Joe Biden pledged to take strict measures against any manipulation or violations in the field of cryptocurrencies, while their defenders emphasized the need for the government to set clear and consistent rules for everyone to follow.

In his report, published by the American newspaper "The Hill", writer Sylvan Lane mentioned 5 main reasons for Washington to take action on cryptocurrencies.

Price hikes and volatility

Stock prices rose to record levels during 2020, and the same applies to cryptocurrency prices, as the price of Bitcoin doubled from about $ 7,300 in early 2020 to a peak that exceeded the $ 63,000 barrier in mid-April of this year.

Other prominent cryptocurrencies such as "ethereum" and "dogecoin" have also witnessed similar rises, sparking enthusiasm for investors, especially with the rise in prices and the emergence of prominent supporters such as Elon Musk.

However, the rise has faltered largely these days, after Musk withdrew its support for the Bitcoin currency, which led to a drop in its price by about $ 30,000 - equivalent to two months of growth - and losing 40% of its value since last Friday.

"Bitcoin has been a classic case for any thriving commercial field that has quickly taken the opposite turn," said Lol Demissy, president of Ally Invest.

Investors jumped from one cryptocurrency to another in search of the most profitable one, and holders of cryptocurrency shares rushed to flee with their money away from it, with the three major cryptocurrencies losing about 30% or more of their original value.

New technology

Banks and major investment companies that previously rejected cryptocurrencies are now accepting them as a permanent part of the financial sector, which is helping to legitimize this burgeoning new technology.

After the Office of the Comptroller of the Currency allowed banks to hold the cryptocurrency for customers, some banks such as US Bancorp, Bank of New York Mellon and Citibank took over Steps to provide services in the cryptocurrency sector.

Goldman Sachs Banking Corporation, which was one of the first investment banks to embrace the cryptocurrency, announced this month its plan to provide a platform for trading Bitcoin amid intense demand for bets related to cryptocurrencies, and this sparked concern among circles of skeptics in the sector.

During a hearing in the US House of Representatives last week, Acting Currency Comptroller Michael Hsu expressed concern that these banking initiatives had been implemented without full coordination with all stakeholders, and did not appear to have been part of a broader strategy related to the regulatory environment.

Difficulties in growth on platforms

Wall Street strongmen are plunging into the world of cryptocurrencies, while online trading platforms and apps that have grown with the cryptocurrency boom face many technical and political pitfalls.

Coinbase - which is the largest cryptocurrency exchange - and other companies saw blackouts this week during cryptocurrency sales.

And the "Binance" trading platform has restricted nearly all cryptocurrency trading amid this chaos, and as a result it received a violent response from users.

Heavy fluctuations in prices and technical problems have raised further doubts among Democratic lawmakers about the legitimacy and safety of cryptocurrencies as investment products.

And last week, Democratic Senator Sherrod Brown of Ohio - who is chair of the Senate Banking Committee - urged the Foreign Trade Commission to take a closer look at decisions taken by his predecessors to allow some companies to trade cryptocurrencies and to custodians offer some banking services nationally.

"A company that does not meet the strict conditions applied to other banks should not be allowed to present itself to the public as a bank," Brown said, describing cryptocurrencies as "risky and unstable."

But Peter Van Valkenburg, director of research at the Cryptocurrency Research Center, believes that bringing the field under the Office of the Comptroller of the Currency is more likely to protect former clients of such companies rather than attract new ones.

Security concerns

Some cryptocurrency critics see it purely as a means of money laundering and fraud.

Although far from current or potential uses, high-profile cases of cryptocurrency-related crime have raised concerns about regulatory loopholes.

The cryptocurrency industry does not fall within the purview of any particular state or federal regulator, which makes standardization or deterring potential crimes difficult.

While federal bank regulators will monitor how the companies they supervise deal with cryptocurrencies, no single federal agency has the authority to regulate cryptocurrency exchanges, and this forces many companies to obtain certification from each individual state on the list. Bodies supervising the transfer of funds.

More money and taxes

With the increase in the number of investors buying more cryptocurrencies to obtain more money, the US Tax Service has intensified its efforts to educate owners of cryptocurrencies about the tax burden.

The agency caused a stir in 2019 when it determined how cryptocurrency investors would disclose their income from investments and that there might be capital gains tax payments.

But the IRS faced a torrent of backlash last Thursday after it announced that as part of President Biden's plan to boost tax compliance, individuals will have to report receiving cryptocurrency with a market value of more than $ 10,000, as they currently report cash transactions.

The value of Bitcoin plunged sharply after this announcement, raising fears of heavy tax bills and limited future price growth among investors.

"As long as we provide equal treatment between cash and cryptocurrencies, we thus provide the required clarity, and this is almost always a positive thing," said Peter Van Valkenburg, director of research at the Cryptocurrency Research Center.