Thursday, August 18, 2022

How Cryptocurrency Regulations Can Change Crypto Market

Despite the wide acceptance of cryptocurrency, the state of regulating them is still a debate – or maybe a battle. The lack of regulations for cryptocurrency puts investors at a disadvantage over stock traders and investors.

Stocks, for example, are highly regulated, which protects investors from risks such as fraud and theft, among others. However, there are yet to be government regulations to govern cryptocurrency, which gives it less certainty and greater risks.

There is no doubt that crypto investors, traders, and enthusiasts enjoy using cryptocurrency without regulations. For instance, cryptocurrency enthusiasts can easily and quickly convert ETH to USD without the help of a middleman.

However, regulations will undoubtedly improve everything; it is the final element needed to establish the cryptocurrency market. This article investigates the state of cryptocurrency regulations today and how they can change the market.

The Regulation of Cryptocurrency 2022: How Is It Coming Along?

As the mainstream adoption of cryptocurrency rises, so did the debate on the role of the government in regulating crypto. While motions are being passed to regulate cryptocurrency, and some countries have regulated it, there are no clear rules.

As a result, the crypto industry is left guessing, although that hasn’t stopped more digital currencies and tokens from being introduced. But, according to an expert, Tally Greenberg, there are no policies devised yet because cryptocurrency and blockchain have no precedent.

Nevertheless, recent conversations concerning cryptocurrency regulation in 2022 suggest that it isn’t a matter of if there’ll be regulation but when. For instance, the President of the United States, Joe Biden, signed off on new cryptocurrency legislation in the bipartisan infrastructure bill. Furthermore, the Federal Reserve is considering issuing a digital currency for the United States.

Cryptocurrency regulation will undoubtedly bring more stability to the market, even if it doesn’t solve its high volatility and speculative issues.

Overall, positive reactions are coming from regulators towards the lightning-fast expansion of the cryptocurrency market. As a result, regulators worldwide have gone from merely tolerating investing in, trading, and issuing cryptocurrency to getting more engaged regulation-wise.

Regulators are willing to be proactive towards shutting down non-compliant cryptocurrency investment or trading businesses or simply issuing fines. They recognize that this innovation can benefit economic development and don’t want to stunt it.

What Government Authorities Will Be Regulating Cryptocurrency?

Government authorities and regulators in different parts of the world are moving towards actively engaging in the cryptocurrency markets. FINMA (the Swiss Financial Market Supervisory Authority), for example, approved its first cryptocurrency fund in the last quarter of 2021.

Furthermore, BaFin (Federal Financial Supervisory Authority in Germany) recently issued its first license to carry, trade, or invest in cryptocurrency. Meanwhile, the Securities and Exchange Commission in the U.S. approved some ETFs, which were launched in October 2021.

Meanwhile, countries like Brazil, the Nordics, Dubai, and Canada have already approved these cryptocurrency-based ETFs. Additionally, several central banks in the U.K., India, Sweden, France, Germany, Hong Kong, and China are evaluating CBDCs. 

Nigeria already launched its CBDC, the eNaira, while El Salvador passed a law making Bitcoin a legal tender. However, El Salvador and Japan are the only two countries, as yet, that have recognized and accepted cryptocurrency as legal tender.

In What Ways Can Regulations Change the Cryptocurrency Market?

Regulations are good for any industry, and the cryptocurrency market is no exception. Many established institutions and large groups want to invest in cryptocurrency but are holding it back because it is unregulated.

Experts say regulation should create a framework in place of disclosures, which will create transparency in investment generally. Transparency is vital for institutional investors in more ways than one, especially considering institutions’ risk-management nature.

Through regulations and transparency, large institutional investors can handle greater cryptocurrency investments, which can help stabilize digital asset prices. The most recurrent item in cryptocurrency news is the volatility of cryptocurrency prices; it is also one of its faults.

Some news outlets are even forecasting that the price of Bitcoin will enter zero, which is enough to dissuade investors entirely. However, a group of experts believes that regulations can help solve cryptocurrency’s instability problems.

When cryptocurrency is regulated, there will be a massive inflow of capital, and this can cause regulated crypto prices to stabilize. As a result, investors who were skeptical about investing in cryptocurrency will start taking it seriously, further driving value and stability.

Meanwhile, experts reassure investors who fear cryptocurrency regulations, saying the pending regulation isn’t the cause of the crypto price concerns. Instead, experts opine that the current drop in the prices of digital currencies is more linked to global macro factors.

Regulating cryptocurrency will undoubtedly drive more investors and individuals to learn how to buy a cryptocurrency and invest. Only a few years ago, government authorities were adamantly against the idea of cryptocurrency.

Today, many see its benefits and potential to aid economic development and are considering or pushing towards regulating it. Despite the concerns associated with the crypto market, regulation can solve most of those concerns, causing new crypto leaders to emerge.

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