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Does The Crypto Market Need Regulation?

25 July 2022 07:18, UTC
Nick James

It has been difficult to govern and trust cryptocurrencies because of their borderless principles and the concept of money of the underworld. Regulations have a chance to break the mold and make it safer while still enabling its advantages to thrive as it becomes more common. Also, regulators can protect young traders who might not know that there are no rules in the crypto market right now.

Restrictions on the use of crypto technology need to be lifted "immediately," according to Jon Cunliffe, deputy governor for financial stability at the Bank of England.

Cunliffe discussed the recent "crypto winter" at the British High Commissioner's house in Singapore, which refers to a period of dropping crypto values that last for an extended period.

An early generation of crypto investors has made a tidy profit over the last decade despite the absence of any regulations. These individuals were attracted by the lack of rules.

In November 2021, the aggregate value of all cryptocurrencies topped $2.9 trillion. With a market value of $48 trillion, it's clear that this sum is insignificant. Nonetheless, it was remarkable for an asset class that had only been around for a few years at the time. As the crypto market continues to crash, authorities think that it’s important to take additional measures and regulate the crypto market. Let’s see how the regulation can affect the digital currency marketplace.

Do We Need Tougher Regulations?

Nearly 30% of investors feel that regulation of cryptocurrencies would improve the currency's value, but it's about finding the right method to do it without destroying all of the currency's natural advantages. There are several places you may start when it comes to regulations. The CEO of Ledn, a crypto-backed lending company, Adam Reeds argues that "many institutions and more established entities are sitting on the sidelines," regulations are beneficial to the business. He thinks that many of these organizations would want to participate in crypto, but the absence of rules prevents them from doing so.

The cryptocurrency market is prone to price manipulation and volatility. Bitcoin, the world's most popular cryptocurrency, climbed to all-time highs in early 2021 before plunging and losing a large portion of its value. Consequently, the absence of authorized information on these digital assets, as well as the technical difficulties linked with them, makes it important to establish rules to protect investors.

It is impossible to overstate the value of openness for institutional investors. Each investment must have a risk profile because of the institutions' focus on risk management, which allows them to maximally avoid the unforeseeable consequences. Cryptocurrencies don't have the transparency needed to build these sorts of risk profiles.

Pros And Cons Of Crypto Regulations

No mistake about it, the crypto market is making a lot of people rich. Sadly, fake currencies and ICOs are also causing consumers to lose millions of dollars. Scammers have taken advantage of the market's lack of regulation by introducing a slew of fake coins. As a result, investors are left with worthless tokens, which exchanges then delist. That is, assuming they ever get it onto an exchange at all.

Several say that criminals are using the anonymity of crypto trading to launder their ill-gotten profits, and that regulation is necessary. People are worried that cryptocurrency cash is being used to fund terrorists or to channel money from unlawful operations. This has led to KYC processes being implemented by the majority of large bitcoin exchanges.

To be honest, many members of the current crypto community have been convinced for some time that bitcoin is the currency of criminals. It was believed to be a medium of exchange for the dark web's illicit trade in narcotics, prostitution, and other goods. After the price of bitcoin skyrocketed in 2017, this picture began to fade away. The sad truth is that this kind of thinking is still prevalent today. So nations keep threatening to crack down on cryptocurrency.

There are, of course, issues with cryptocurrency regulation. To see the significance of this, consider why cryptocurrencies have become so popular in the first place. It's that easy! People want to take control of their lives and avoid centralized government systems that make them appealing. A flight to safer investments such as cash and government bonds would be the likely outcome. Investing in a hazardous asset with an unclear ideological goal would be a waste of time.