crypto regulation

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Bitcoin and other cryptocurrencies are on the verge of mainstream uptake. Started almost a decade ago, digital currencies are changing the financial landscape. They ushered in the age of decentralized currency controlled by no central authority. 

Even though successful, cryptocurrencies have several concerns. There is a need for consumer protection, like in fiat currencies. Regulation is inevitable in the long run for virtual currencies. 

As of now, regulations are not so far off. Follow through this analysis to understand; 

The future of Cryptos Rely on Regulation

To regulate or not regulate cryptocurrencies is a long-time running debate. The decentralized cryptocurrencies’ main purpose is to avoid regulations. On the other hand, cryptos are a risk to consumers. It is full of scams and aids in illicit transactions. The only way to stop these negative roles is by regulations. 

There are concerns about the possible impact of regulations on innovations. Still, it wouldn’t have any bearing. Different leaders and securities and exchange commission are in advanced stages of regulations. The governments have also been at the forefront of regulation. European Union commission already has a detailed crypto regulation proposal. 

The document seeks to harmonize all the other national-based regulations. It will also give clarity on what makes a crypto asset. It at the same time has to provide directions to the token issuers, receivers and investors. 

The opposers of regulation claim seek to keep the coins away from the regulators’ grips. They believe regulation would restrict the blockchain. Yet, the technology’s main goal was to end the status quo. Cryptocurrencies are all about challenging the existing markets and opening new opportunities. It was to promote risk-taking in the conservative sector. 

Still, every risk comes with consequences. So far, the cryptos have gained a bad reputation for risk-taking. Most potential users by now have formed negative perceptions towards the coin. The way to get to the investors is by reversing these negative perceptions. That can only happen with regulations. 

Crypto Exchanges and Industry Players Support Regulations 

Crypto prosperity also needs an orderly market. So far, most exchanges are on the side of the regulators. They have already experienced some issues dealing with rogue clients. Most clients would also prefer regulated Bitcoin exchanges. 

It means the regulations opens for them a larger market. In the end, they also get to gain consumer confidence. Top crypto players like Nasdaq and Coinbase are supporting the regulation. 

Crypto regulations are also great for innovations. While most people think it stifles development, it does the opposite. Unclear rules mean no one knows what to expect. The regulators would not be prompt with penalties and fines. The lack of direction discourages transformative ideas. Those looking to advance crypto innovations will have to look for enabling environments. 

Already regulations in various crypto parts have been successful. The regulated Bitcoin futures are successful. They allow traders access to cryptos without the underlying risks. The success led to the creation of Ethereum futures and other derivatives. 

The future of cryptos relies on regulations to provide an enabling environment. It is also to promote innovation. 

What to Expect from Future Crypto Regulations? 

As a new product, regulations scope is difficult to predict. The crypto sector still attracts different inventions for limitations. Whatever happens, the laws seek to promote innovation and safety. The laws will be clear on what makes crypto-assets. 

Lack of rules allows some products to use the cryptocurrency tag without actually being one. They take advantage of the people’s susceptibility to the new invention. They then trick the unsuspecting investors. 

Some products also want to adopt currency status when they are securities. This has been the state of Initial Coin Offerings (ICOs). While started as securities, they have been looking for ways to stay as currencies. This is to help avoid the regulations.

The regulations will define features that qualify a commodity to become a cryptocurrency. It will then detail all the assets the law cover. From this, investors will have an easy time choosing a product. No crypto product would find a way to evade the regulations. 

The other expectation is for the stablecoins to have a hard time. The coins are cryptocurrencies with value attached to fiat currencies or other commodities. They are popular due to their stability, unlike the other virtual currencies. They are yet a threat to the traditional economy. 

The stablecoins would make the alternate commodity demand leading to high prices. It will also affect deposits in traditional commercial banks.

The regulations will be hard on the stablecoins. This is to protect the traditional financial system. Prior regulations have seen Telegram drop its TRON project. The same has been the case with Facebook’s Libra. 

Startups and other fintech companies will also have it a little tough starting. 

They will have to contend with the new rules. Some of these rules will need in-depth documentation. Still, these will be for investor and consumer protection. 

The Future of Crypto Regulations Happening Now 

The past few months have seen an increased crypto regulation activity. The covid-19 effects have been big on the crypto world.

The pandemic has increased the crypto uptake. Virtual commodities are now the best alternative investment. 

Specific countries have already put in place digital currency regulations. European countries like Germany and France have advanced regulations. It is these regulations of the European Union Commission to harmonize. It will ensure all the member states operate on similar premises. 

The Conference of State Bank Supervisors has provided a regulatory framework for payment companies. The laws cover payment services and cryptocurrency service providers. 

The laws that cover the whole of the USA look to tame illicit transactions. It requires the service providers to undergo a thorough examination by the regulators. These make them compliant and also accountable for transactions. 

Bottom Line 

With cryptocurrencies becoming mainstream, the need for regulations has never been so dire. Currently, some rules are already in action. Even though some more will be coming, nothing much will change. All rules are on the premises of making the virtual currency world safer. 

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(Excerpt) Read more Here | 2020-10-30 03:16:07
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