Cryptocurrencies are renowned for their decentralized nature and the fact that there is no central authority in control. The financial freedom aspect of it is a huge draw card, knowing that no one can freeze your account or control your money. As cryptocurrencies gain popularity and increased adoption, many organizations have started working on regulations to have some control over the system. Many view these regulations as a negative element, hindering the “freedom” aspect of our beloved crypto industry. But is this really the case? In this article we’re going to explore how regulations could empower the crypto industry.
Who Is Behind Crypto Regulations?
While no one entity is in control of cryptocurrencies in general, governments have taken things into their own hands and have begun creating and implementing crypto regulations. While many early adopters despise the regulations, there might be some long term potential to implementing regulations.
For now, as governments implement new regulations, investors typically rush to buy or sell various digital assets to increase gains and reduce losses. Obviously this takes its toll on the price of various assets, as a massive sell off would decrease the value while a large purchase would pump the price up.
A classic example of this is in 2018 when news got out that the South Korean government was looking at implementing heavy controls, even bans, on the use of cryptocurrencies. Following this speculative news, the value of cryptocurrencies across the board dropped sharply in a matter of hours. Bitcoin dropped nearly 15%, while other cryptocurrencies like Ethereum, Ripple and Litecoin also saw losses around that amount.
The Upside To Crypto Regulation
However, not all tales are negative. When South Korea eventually decided to take a more positive approach to the world of digital assets, the value of the cryptocurrencies again rose. Japan’s heightened interest and adoption of Bitcoin also contributed to the rise in value, as well as when India lifted their cryptocurrency ban as recently as March 2020.
So, do regulations impact crypto prices? The answer is yes, and it’s not necessarily a bad thing. As the industry looks to increase adoption, one might not think at first but regulations could be a positive step in the right direction. For a new user wanting to enter the market but uncertain over whether cryptocurrencies will be legal in years to come, or what the tax implications might be, regulations offer a safety net. Knowing that there are laws in place to structure and safeguard your investment is very assuring to a new time crypto trader.
How Regulations Could Empower The Crypto Industry
Often viewed as a hindrance to the market’s potential, regulations might actually empower the crypto industry. Here are a few instances on how regulations can benefit the market:
Increase levels of certainty to new investors, a draw card that eliminates the unpredictability for the long term feasibility.
Increase use cases, as with more regulation more fiat operating merchants can start accepting cryptocurrency as payment options. The more the governments are on board, the more the use cases increase.
Accountable asset ownership, meaning that users employing cryptocurrencies for illicit activities can better be managed due to rules and regulations in place to hinder them. Which leads to:
More positive market overview due to the nature in which crypto is used – for accountable payments rather than dark web antics. Which again, circles back to the first point.
Face Them As They Come
While cryptocurrencies have been in existence for over 11 years, it is only in the past few that regulatory bodies have been thinking about and implementing basic levels of regulations. The industry has earned a name for itself as being the “Wild West”, however it also stood its ground through the pandemic. It’s anyone’s guess what might happen, all we can do is remain vigilant to updates, stay clear of FUD-inducing media (Fear Uncertainty, Doubt), and rather look at how regulations could empower the crypto industry.