A well-regulated framework is necessary to create a crypto market that can last
The regulatory environment surrounding cryptocurrencies is constantly changing, although more slowly than the cryptocurrency industry itself. Institutions and the general public agree that mining cryptocurrencies requires a rigorous and transparent regulatory framework. The many scams, phishing attempts and hacks that the industry sees have no legal repercussions. This highlights how brazen the scammers are and presents a murky picture of the bitcoin market.
It’s time to wake up the sleeping decision makers.
The rise of the NFT market in 2021 has stunned governments and international organizations. A clear legal framework for NFTs is necessary to support the long-term growth of the market, given that Ethereum has recorded NFT sales of over $9 billion. Only the last three months of 2021 saw $1.5 million in illegal activity in the NFT market. Even though the amount of money laundering taking place overseas is far greater than this data indicates, this undesirable trend could still exist in 2022.
NFTs are still not categorized; therefore, the US and UK could not develop a clear set of guidelines. The conduct of issuers and NFT markets may be subject to Know Your Customer and anti-money laundering regulations. The long-awaited Fed study, released in January, looked at the pros and cons of a government-regulated cryptocurrency. Finally, the report chose to delay the choice to move forward and gave the public and other interested parties until May 20 to comment in order to move forward.
Similar to how Stablecoins woke politicians from their sleep. Also up fivefold, stablecoin sales hit $164 billion at the end of 2021, up from $26 billion at the start of the year. 2022 saw further growth, with the first six weeks of the year seeing a 6.8% increase. In its report, which was released in 2020 and 2021, the Financial Stability Board – a global organization that tracks and organizes the efforts of financial regulators around the world – called for action on stablecoin. The council designated July 2022 as a notional date for the creation of regulatory frameworks in national jurisdictions.
JStablecoin regulation has been made more difficult by the introduction of decentralized, US dollar-pegged stablecoins. Stablecoin, however, should be the first cryptocurrency to be regulated, experts say.
Why is cryptocurrency regulated?
The market will be more stable if cryptocurrencies are subject to more regulation. However, a large portion of bitcoin proponents vehemently oppose market controls. They believe this will stifle innovation and go against the fundamentals of cryptocurrencies, which include decentralization. Stakeholders and investors have opposing views. Let’s take a look at experts’ opinions on the regulatory environment around cryptocurrencies and why they think it benefits investors.
- More stability in the market:
For investors who worry about day-to-day market fluctuations, a regulatory framework will provide peace to the market and foster a positive working environment in the industry. The government’s strong regulatory framework could help reduce speculation in cryptocurrency assets. Less speculative activity will increase investor confidence, which could attract longer-term investors who have previously avoided a highly speculative and volatile crypto market. Even if it doesn’t attract more people, it may at least change the way they now act towards cryptocurrencies.
If we make it clear, regulation of the cryptocurrency market can restrict the activities of individuals looking to make a quick buck by guessing how much the next coin will be worth. Protecting investors and building their confidence: Due to the lack of a legislative framework that can provide asset protection, cryptocurrency investors now have no security for their investments. Major exchanges like Coinbase and Gemini are among those operating under newly established federal and state regulations in the United States. However, their principle differs from that of the stock exchange and other trading platforms.
Since the cryptocurrency market of any federal agency is unregulated, investor protection there is less intense. To make the cryptocurrency market safer for investors, regulation is necessary. Investor confidence would rise further in a safer market, fueling the expansion of the cryptocurrency sector.
The absence of rules and regulations encourages arrogance in malefactors and as a result, widespread fraud, scams, sweepstakes and market manipulation plague the entire business. The previous two years have seen a sharp increase in cryptocurrency-related crime. Research from blockchain data firm Chainalysis claims fraudsters stole $14 billion in cryptocurrency last year, up from $7.8 billion at the start of 2020. Despite the possibility that a legal framework could calm the cryptocurrency market, it remains a dangerous and speculative investment.
The government’s efforts to oversee the regulations
The Financial Stability Board’s research also examines trends that will occur in 2022. The study provided insights into how central bank digital currencies (CBDCs) have developed in more than 91 countries around the world. This demonstrates that the federal government is aware of the possibilities of virtual currencies. The government is making extra efforts and policy makers must work hard to provide a comprehensive regulatory framework that can support innovations and allow a wider audience to accept digital assets.
CBDCs could improve tax compliance and more accurately track financial activities. However, this can seriously hinder the adoption of cryptocurrencies. It might even displace some decentralized digital currencies since CBDCs enjoy stability and because the company believes government organizations inspire a lot of people.
Cryptocurrency requires a well-regulated structure that can ensure that innovations are encouraged and growth is not stifled. The financial system could renew itself and evolve towards a more egalitarian future thanks to cryptocurrency.
“The content of this article is provided for informational purposes only. It does not offer investment advice and is not a substitute for private investments.