The Crypto community is having heated discussions about the regulations. People are split into two categories. Some believe that the regulations are going to make cryptocurrencies die out and others think that they just will not survive without them. So who is right during this conversation and what should be the correct way forward from the state where cryptocurrencies are now?
One way or another it is worth noting that this issue is just never going to go away. Some crypto advocates argue that the cryptocurrency market is what we know and love due to the fact that it is unregulated. However, others think that without regulations the market will never penetrate the masses and will always be some kind of a distant concept to the vast majority of the population. They also warn that the regulations will put cryptocurrencies at the disadvantage in comparison to fiat currencies that have the backing of major financial institutions including governments. The central banks of the world have shown already that they are unwilling to interfere with the crypto market at best and even less interested in assisting these digital currencies to become more prevalent.
A number of nations have put themselves in the position of crypto-friendly countries. Switzerland is a good example of the historic decision from the Swiss Financial Markets Supervisory Authority – a financial regulator of Switzerland – which has approved the licenses to crypto clients. This has pushed some of the major companies like Facebook to establish their own not-for-profit crypto associations like Libra inside of the country. The main takeaway here is that the statistics have shown this methodology to be working quite well for the business sector. The approach, in general, has resulted in the report suggesting that the value of the top 50 blockchains of Switzerland has almost tripled since the first quarter of 2019. The accumulated worth of these companies at the end of 2019 was around $41 billion.
On the other side of the world, we have the United States of America, which has been extremely aggressive towards the crypto development process in the world. They have imposed strict regulations that have put a stop to the development of Libra in the country to the point where some of the politicians are being literally hysterical about the subject stating that the crypto development would undermine the dollar and thus threaten the world economics since it is heavily reliant on the USD. Then there are countries that took this even further like India, which has come out with initiatives to put people behind bars for as much as 10 years for dealing in cryptocurrencies. Experts have argued that in the long-term this would damage the economy of India as well as cause brain drain, which means that the able developers would start leaving the country for better options elsewhere, and thus cause the nation to lose billions in revenue eventually. What is even worse, considering the already dire situation in India, is that the national government cannot decide whether to enforce these laws or not which creates even more stress on the market and raises uncertainty to whole new levels.
You only need two words to get crypto advocates bustling like a beehive – Crypto and Regulations. These two just do not sit well together in the minds of a lot of people. Steve Wozniak, who is the co-founder of the world’s most expensive company – Apple, has come out stating numerous times that the regulations are just ways for the national governments to assess as much control over the revenue flow as possible. Apart from Switzerland, South Africa is one of the other countries that took a very liberal approach towards cryptocurrencies. Unlike what the government is doing with much needed South African forex regulation that works on putting a stop to scamming brokerages that are trying to exploit vulnerable people and steal their money, the cryptocurrency market is given a free rein on what is happening. However, with cryptos, it is not necessary to have some kind of a medium between the person trading and the exchange. The regulations on cryptocurrencies worry people about the transparency of the transactions as well as the confidentiality aspect.
It is a community consensus that the cryptocurrencies like Bitcoin (BTC) are decentralized by design. This very same decentralization has made it possible for these currencies to become what they are. The whole anonymity and transparency that comes with it are going to fly out of the window once government regulators start getting involved. The concept is quite easy to grasp. The loss of anonymity is going to have once people will need to declare all of their income including cryptocurrencies. In the US the regulators already have implemented these laws. Once some agency has to go through all of the transactions they have to verify from who and how much was transferred. The problem is that with the current state of blockchain it is basically impossible to do it since the public transactions that are registered on the blockchain do not show the identity of a person who this wallet belongs to. This would mean that new software will have to be designed to accommodate for new laws to make it easier for the agencies to check who does what. Apart from this, it will most likely impose new taxes due to the fact that there will be a whole national department working on such cases from the revenue services. This will impact the speed at which the transactions go through, the fees that are implemented as well as a whole myriad of other aspects of the trade.
Regulations on the crypto market and blockchains are going to impact the way investments are happening in the digital world as well. For now, the way things work is that there is no minimum requirement from users if they want to contribute to the projects they feel are worthy of donation. This enables people of all budgets to contribute as much as they wish but the regulations will shift the interest from the companies to bigger fish in the tank which would be hedge funds, bigger companies, and high net-worth individuals.
Another viable fear of regulations comes from the other things that governments are trying to regulate. For example, the internet community has been under attack numerous times from different government sectors be it the EU Parliament or American congress. From what we can gather from the interviews that the US Congress conducted with the founder and CEO of Facebook, Mark Zuckerberg, it is obvious that the government officials are having a hard time adjusting to the speed at which the technology is developing. The blockchain and cryptocurrency market is advancing at a very high speed. During the last 12 years, the whole sector has undergone a maturity process that normal fiat currencies required centuries to do. This obviously gives birth to the fears that the crypto market is going to be regulated by people who have no idea about the technology itself forcing it to slow down and sit in the confined frames of what some politicians think about it.
It is not all that bad though. There are upsides to the regulations and it is obvious from how other regulated markets are fairing. For example, the safety regulations applied to other older markets like forex, stocks, bonds, etc. are working to the benefit of the shareholders. The investors are protected with a number of quality of life improvement laws and regulations. For example, the foreign exchange market required heavy regulation from a lot of different financial institutions. Australia with ASIC, Singapore with FSA, UK with FCA, and the US with FOMC have made sure that their financial worlds are much safer to trade in and the licensed brokers just do not have the initiative nor legal power to exploit their clients.
One way or another, the concept still stays up to the debate. There are numerous benefits to regulations as there are to the chaotic nature of the cryptocurrency market. However, the end result should always be the benefit of the general population and the clients. Hopefully, things will work out in the end.
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