Regulation Of The Crypto Space: Death Of Crypto Or Its Elixir Of Life

Cryptocurrency is certainly an invention of a lifetime. Many experts believe that crypto will prove to be a bigger invention than even the internet. Only time will tell if that’s true or not, but the potential of the crypto space is undoubtedly staggering. 

The past decade has made the term volatile synonymous with crypto. The Crypto market is extremely volatile and nobody can accurately predict where the market will head next. This extreme volatility has meant that many have made huge sums of money in the crypto space within a few years and many have lost big as well. Regulation of the crypto space will certainly make crypto space less volatile. 

Why is the regulation of the crypto space needed?

Crypto is a fairly nascent asset class and because of the complex technology at the heart of it, retail investors don’t know much about it. 

With the money-making potential in the crypto space, there also come challenges such as cybercrimes, scam tokens, and money laundering issues. Let’s take a look at why the regulation of the crypto space is needed.

1. Preventing market manipulation and protecting investors: Investing in cryptocurrencies such as Bitcoin in the past few years has been nothing short of a roller-coaster ride for investors. Bitcoin rose to its All-Time-High value at the beginning of 2021 and then plummeted similarly, wiping out a chunk of its value. Because of the lack of authorized information in this space, the investors are always in a maze and don’t know what they will encounter next. Proper regulations will go a long way in stabilizing the crypto ecosystem and make it a much more attractive investment option for an ordinary investor who does not have a crazy risk-taking appetite.

2. Clearing out of cryptocurrencies: While most of us are familiar with popular cryptocurrencies such as Bitcoin, Ether, and Dogecoin, thousands of other cryptocurrencies exist in the market. Many of these cryptocurrencies are also scam coins that are in the market with the sole intention of defrauding their investors. With adequate regulations in place, most of these cryptocurrencies will either be cleared out from the market or there will be adequate authorized information available about their risks and potential. This again will go a long way in protecting an ordinary investor.

3. Need for professional advisors: We have all witnessed the speed at which blockchain technology has evolved in the past decade. The speed of this technological advance is such that ordinary folks simply can’t keep up with everything that’s happening in the crypto space. With proper regulations in place, we will also see a rise in skilled professionals whose sole aim will be to make ordinary investors understand the risks associated with this space and also the perks.

4. Cyber security concerns: Crypto is a digital space and the past few years have seen numerous hacks being carried out in this domain. While the technology builders are trying to put checks and balances in place so their crypto tokens can be immune to hackers, without regulations in place, an ordinary investor will still be at risk. Regulations will help crypto investors protect their assets against hacks and scam coins.

5. Money Laundering: Money laundering has been a major issue for the crypto ecosystem. Because the identities of the parties taking part in the transactions are not known, this facilitates the possibility of money being funded by terrorist organizations. Regulating the crypto space will ensure that there is a client due diligence mechanism in place which will help stop activities such as money laundering from taking place in the crypto ecosystem.

Apart from these obvious reasons which need to be addressed to make the crypto ecosystem a lot more healthy environment for an everyday investor, regulations will also be good for the innovators of crypto startups. 

In the short period that the crypto ecosystem has existed, it has already crossed $2 trillion in market cap. A World Economic Forum estimate suggests that by 2025, more than 10% of the global GDP will be stored on blockchains. 

Cryptocurrencies and blockchain technology may be very new but it is still creating thousands of jobs all across the globe and new and innovative startups and popping up in the space every day. But without adequate regulations in place, even the creators of these startups are in limbo. 

They don’t know if the upcoming regulations will help them grow their businesses or will the new regulations will whistle the end of their startup. News such as China banning all crypto transactions fills fear in the hearts of startup owners in the crypto space. 

This lack of clarity is not good for innovation and if governments all across the globe come up with regulations that help in blooming the crypto ecosystem it will be a win-win for everybody. 

Countries like Singapore with their Payment Services Act, 2020 have taken the right steps in this direction and they will benefit from these positive regulations. Singapore’s laws now protect retail investors in the crypto space while also promoting entrepreneurship. These are the steps in the right direction. 

Regulation of the Crypto market is good for everyone

With the proper regulation of the crypto market, the entire ecosystem will become much less volatile. This will mean that investors who are not willing to risk their money in a frantic ecosystem will also find the crypto space worth pursuing. 

Another added advantage of the regulations will be that the real-world identities of the crypto owners will be tied to their digital assets which will help in stopping money laundering and cyber frauds.

Regulations will also help in making virtual assets easy to categorize and understand. Regulations will put a proper valuation on a cryptocurrency and thus the investors will know exactly what they are investing in and what they can get out in return. 

While it is true that the main idea behind cryptocurrencies is decentralization and anonymity. Thus putting regulations in place seems to be contrary to the very idea of cryptocurrencies. These ideas are also the reasons cryptocurrencies are being tarnished in their reputation as being a haven for money launderers and terrorists. 

Regulation might seem like a death knell for crypto in the short run, but in the long run, these same regulations will make the crypto space blossom and make it a safe environment for its investors and stakeholders.