Why Is Crypto Regulation a Good Thing in Today's World?Dec 12, 2022, 2:52PM
The crypto market has been through an exciting time. The sensational bull run of 2017 has given way to a sudden drop in market confidence.
Undoubtedly, the cryptocurrency market has been going through an exciting time lately. The sensational bull run of 2017 has given way to a sudden drop in market confidence, causing investors and traders to become anxious about the future of digital currencies.
Governments have also voiced their concerns regarding the risks of crypto investing, and regulators responded by tightening their grip on the industry. As a result, many crypto exchanges now require users to verify their identities before buying or selling digital tokens.
In this article, we'll explain why there's an increase in regulation of the cryptocurrency market, why the government doesn't like crypto, how these regulations might help protect investors from potential scams, and how regulation could hurt innovation in this sector. Let's get started!
Pros and Cons of Regulating Crypto
Crypto advocates have argued for many years that the world does not need additional regulation for cryptocurrencies because any central authority does not control them. These people believe that regulation will stifle crypto sector innovation and slow adoption.
However, some believe that regulation could be beneficial. Let's look at the pros and cons of regulating the crypto market.
First, regulation could help prevent bad players from running scams and cheating investors because they must comply with government-issued rules and regulations. In other words, fraudsters who operate shady and unlicensed crypto exchanges will have fewer places to hide.
Regarding taxation, it is also worth noting that governments do not have the same level of oversight over crypto trading as they do with fiat money. Therefore, they would welcome the opportunity to increase revenue by imposing greater taxes on crypto trading.
Another potential benefit of government regulation is that it could help increase the adoption of cryptocurrencies.
Can Regulation Help Increase Adoption?
As we discussed earlier, one of the potential benefits of regulation is that it could lead to higher adoption rates. If governments impose strict rules on the industry and punish bad players, the public may feel more confident to invest in digital tokens. This action could have positive knock-on effects by increasing trading volumes and boosting the price of cryptocurrencies.
Let's not forget that their demand level determines the price of cryptocurrencies. Suppose more people are buying and selling cryptos, then it is likely that demand for these assets will grow, which could lead to a spike in the price of digital tokens and a strong rebound in the market.
However, governments must ensure that they stay moderate with regulation. If they impose too many rules and restrictions on the industry, they could limit innovation and reduce the likelihood of adoption.
How Will It Affect Crypto Trading and Holding Assets?
If governments impose strict regulations on the crypto industry, this could lead to a few changes in how people interact with digital tokens on Yuan Pay, Binance, Coinbase and other crypto platforms. First, it is likely that trading volumes will increase because some people will be more likely to buy and sell cryptos if the government has verified their identities and approved their accounts.
Another exciting change could be in the way that people hold their assets. If authorities impose strict rules on traders, some may prefer to leave their assets on the exchange rather than take the risk of keeping them in a wallet. This process could cause a rise in crypto exchanges as people flock to fully regulated ones.
Creating new digital tokens could also become more complex with so many rules and restrictions. There are many initial coin offerings (ICOs) that developed in the past few years, where developers created them outside the jurisdiction of any government. Therefore, they did not have to comply with particular rules and regulations.
Reasons Why Many Governments Still Don't like Crypto
There are several reasons governments still do not like crypto even though they have started to regulate the industry. First, they could be worried that they will not be able to collect enough tax from the crypto industry. This industry might be worth $335 billion by 2021, and governments are likely hoping to collect as much tax as possible from this sector.
Second, some governments may feel threatened by the potential of cryptocurrencies and blockchain technology. After all, these innovative technologies have the power to disrupt many industries and could even change the way that governments work. Several governments have also expressed concerns about the potential for criminals to use cryptocurrencies to launder money.
The Police of London recently suggested that British authorities impose stricter regulations on crypto to prevent criminals from using them to launder money. Such concerns are understandable, but governments could achieve more by joining the crypto revolution than by trying to shut it down.
The cryptocurrency market has gone through a lot lately. Some believe that regulation could be beneficial. If governments impose strict rules on the industry, this could lead to a few changes in how people interact with digital tokens.
Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.