Crypto Regulation: Is It Good Or Bad For The Market?
Cryptocurrency regulation has indeed become commonplace. It's not just that the number of smallholders has increased or that more organizations and businesses are working with Bitcoin. Governments are developing the regulatory framework more than ever before, which is a sure sign of the growing popularity of cryptocurrencies.
The cryptocurrency market is so entrenched that governments feel the need to control it for many reasons, not all of them bad. From exchanges to tax-compliant investors, regulation has a significant impact on how companies operate in this asset class. But how good or bad is regulation? Can he expect the market to help him or will he hinder the market because he still has room to grow?
In 2017, the cryptocurrency market took the world by storm. Bitcoin in particular was very popular before the ICO boom, and the vast majority of the public became aware of, invested in, and supported individual projects when they went public each year.
The turmoil and money (and resulting profits and losses) attracted the attention of regulators, who sought to crack down on the so-called "Wild West." But despite the rapid flow of funds and the sudden market boom, regulators have been slow to respond.
This was understandable given how new this asset class was and the difficulty of implementing controls that work seamlessly with existing markets. But cryptocurrency is unique in every way, and the same laws haven't had the same impact on a largely decentralized market.
Fast forward a few years and we are now in a much more controlled market. Regulators and legislators have had much more time to study how the market works and apply their oversight to specific facilities and processes, thus successfully limiting the market, at least partially.
All major exchanges have now made compliance their top priority, and not many exchanges have KYC requirements. In some countries, such as South Korea, exchanges require a license to operate. Taxation is also widespread in most countries, and investors are expected to report their activities and earnings.
AML and KYC have become two of the top priorities for regulators in trying to stop illegal activity, while investor protection and market manipulation are priorities to prevent unethical financial gain. Authorities around the world have been beating these drums for the past two years, and now there is a global consensus on international cooperation on this issue that is really taking off.
And, of course, there should be international cooperation in this matter. The fact that cryptocurrencies are decentralized requires a comprehensive approach to rulemaking, as the asset class knows no boundaries. The debate about whether it is good or bad is not black or white: both sides have their pros and cons. However, it is important that regulation draws attention to the market, which in turn increases the attractiveness of the growing market if regulation is appropriate.
A case of bad regulation
For years, the cryptocurrency market has been wary of regulation. Roughly speaking, this view boils down to the fact that it will stifle innovation and reduce the allocation of resources. But regulation was inevitable, especially with the speed at which it was developing - if crypto investors had expected the market to be as large as they predicted, it would certainly have attracted the attention of regulators.
Fans often referred to the slightest noise of rules discussion as "FUD." Somehow her feelings were not unfounded. In very few cases, fears that an overzealous government might put pressure on the market have been fully justified. China is the main – and perhaps the only significant – example of a country that has completely banned cryptocurrency.
China is a good example of bad regulation: a country that imposes draconian regulations and almost overnight destroyed one of the most popular crypto markets. Miners also lived on the land, who were also exterminated according to draconian rules.
Even when it comes to cheaper regulations like taxes or KYC rules, regulation has its drawbacks. This, of course, leads to a significant decrease in trading volume and slows down the speed of the crypto market. This makes it less likely that anyone, anywhere can invest in the cryptocurrency market. Financial availability is one of the key factors that determine the asset class.
Also, few people worry about stifling innovation, even though many governments seem focused on avoiding it. Regulation has previously been argued to prevent technology and gangs from flourishing, but governments are working to prevent this.
Governments must have realized what decentralized technology can do. This is where regulation may really come in handy, and statements in previous documents indicate that they want to encourage innovation.
Look for fine tuning
These years of FUD seem to eclipse the years of regulation. If you look at the narrative of media regulation, you will see a significant difference in how the question is presented. Cryptocurrency companies, media and individuals alike have realized that regulation is necessary for major financial players to grow, prosper and dominate the market.
For individuals, the rules protect investors from fraud, which unfortunately still occurs in the cryptocurrency market. This type of activity puts the funds of crypto investors at risk, sometimes affecting hundreds of millions of dollars, as well as people who do not want to enter the market. Investor protection is important and gives the market some stability.
With increased smart regulation, the market gains legitimacy in the eyes of many people and companies. Although it has done a lot to shed its image in recent years, for many the market is still in the shadows and all the talk of advantages will not make them join the semi-recognized market. The rules will completely solve these problems.
The effect of laws that protect and legitimize the market is only to increase recognition. Although the rapid growth of the crypto market is impressive, it still only covers a small part of the world's population. The crypto market has new and powerful real-world financial uses that the entire world can benefit from, with unprecedented cost and time advantages.
Crypto companies must work with regulators
The cryptocurrency market is regulated; There is no doubt about it. Whether this is good or bad will always be up for debate, but any smart investor or company will know that working with regulators is better than fighting them.
The market will grow and working with regulators will ensure that a regulatory framework that everyone agrees on is the best outcome. The cryptocurrency market is here and so are the regulators, so everyone involved needs to act.
Rahul has less than 1 BTC and 40 LRC.
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