Crypto Regulations: Pros and Cons

Since the development of the first cryptocurrency, Bitcoin, more and more people have started engaging in the field with hopes of earning profit. Along with this, developers were also inspired by bitcoin’s success and came up with more cryptocurrencies known as altcoins. With the popularity of cryptocurrencies, small firms and known businesses have also started accepting them as a payment mode.

With the benefits it offers, millions are so hooked up to this field. Over the years, a popular question has emerged among crypto advocates and investors: What could happen if cryptos are regulated? With that in mind, read on to know the pros and cons of crypto regulations.

Cryptocurrency Regulations

The topic of crypto regulation has been common for some time now and has attracted mixed reactions from investors. While crypto enthusiasts believe that regulation is a good thing and that it helps the industry make the world a better place, others believe that crypto regulation will kìll the market. Given these reactions, it’s safe to say that the crypto market is hesitant regarding regulation.

Regulation is a factor in why cryptos have been falling for the last few weeks and has caused some investors to lose huge amounts of funds. The market’s volatility makes it difficult to trade with little knowledge. This is why some traders prefer to seek guidance from experts by engaging in reputable platforms such as:

1. Binance
2. Bitcoin Up
3. Coinbase

Cryptocurrency regulation can be controversial, and it has garnered different reactions among investors. Some believe that more regulation could mean more stability in this volatile market; anti-regulation crypto enthusiasts highlighted that the decentralised nature of digital currencies, which are not backed by third-party agents such as the bank or the government, is a big draw and could pose a threat to the decentralisation of crypto.

Cryptocurrency Regulation: Pros

Cryptocurrency regulation has gained some support from some crypto enthusiasts. If you’re wondering what benefits it can offer, check out the advantages of regulation of the cryptocurrency market.

1. Reduce scams 

The crypto market is proven to be profitable and has allowed people to be part of the list of crypto billionaires. However, people are losing millions, too, through crypto scams and ICOs. Due to the unregulated nature of this market, scammers have dominated the market by launching all sorts of scam coins. These coins enter the market, and once investors put in money, the project owners suddenly disappear.

On this side, cryptocurrency regulation could greatly favour the market. Regulations ensure that every new coin entering the market meets certain criteria. Due to this, people would feel safer putting money into their crypto accounts.

2. Drawing institutional money

Imagine yourself being a mutual fund manager who has control over billions of dollars in investor funds, which are pension money. Would you put it in the crypto market? There is a good chance that you will say no. This is because an unregulated market has the power to make your money vanish in an instant, and you may even earn jail time for neglecting your investors’ capital.

However, in a regulated market, clear operational structures are in place, and institutional investors would pour billions of dollars into cryptos because they believe it is safe. Due to safety, liquidity levels would increase and make the market more efficient for traders.

3. Moral Legitimacy 

Since it’s the first cryptocurrency to be ever developed, a lot of representatives of the modern crypto community assume that bitcoin is the coin for crìminals. They think that this crypto is the coin for buying drùgs and other crìmes that take place on the dark side of the web. This only started to fade after the price of bitcoin skyrocketed in 2017. However, this thinking is still present nowadays, and some countries are still not openly accepting cryptocurrencies.

Cryptocurrency Regulation: Cons

While the advantages of cryptocurrency regulation may be tempting and beneficial, it’s difficult to look at one side only of this issue. To give you an idea, check out the disadvantages of cryptocurrency regulation.

1. Risk of capital flight

Cryptocurrencies are popular because of the desire of people to take charge of their assets without the need for third-party agents such as the bank or the government. Therefore, introducing regulation would be like bringing the government into the industry – the opposite factor which led people in the crypto industry. Due to this, the result would be a risk of flight to traditional investments since they are more stable, and there would be no point in storing assets whose objective is no longer clear.

2. Poor user experience

The process is clear and concise when it comes to buying, selling or trading cryptos in an unregulated system: simply create an account using your email to access the market and perform the transactions immediately. However, with a regulated crypto market, customer identification procedures would line up, and crypto platforms and ICO issuances would require more identifying documents and information before being permitted to enter the platform and do the transactions.

3. Exclusion of valuable projects

While a higher requirement increases the overall quality of projects within the crypto space is true, it also blocks out high potential projects due to the financial and regulatory strain that are handling a compliant issuance places on less capital-starved businesses. Cryptos and ICOs grew quickly in popularity due to investors offering opportunities to invest in projects. Meanwhile, startup companies can access capital quickly and help finance the development of their products through the ICO model.

Conclusion

With the various and mixed opinions over the cryptocurrency craze, it has the potential to completely disrupt monetary policy across the globe. Currently, the crypto world is divided into two groups: those who are in favour of crypto regulation and those who are not. With these various insights and hundreds of new coins emerging each month, regulating cryptocurrencies is still a long way to go and will forever remain a game of cat and mouse.