Whenever there is a significant mention of cryptocurrency regulation, the price of cryptocurrency fluctuates violently.
There is a lot of fear in the crypto community when regulation is brought up.
However, many crypto experts argue that crypto investors should welcome regulation.
How Might Regulations Help Cryptocurrency and Crypto Investors?
Regulation could mean stability in the crypto market.
This protects crypto investors, which is a positive thing.
Still, many crypto investors balk at the idea of any regulation.
One of the driving forces behind cryptocurrency is that it is not controlled by any government or financial institution.
Many fear that regulations will hinder innovation and run contrary to the spirit of decentralized currency.
However, regulation could provide a safety net for long-term investors.
It could clean up some of the fraudulent activity seen in the crypto ecosystem.
It could also set guidelines that allow companies to integrate cryptocurrency into the environment better.
However, before cryptocurrency regulation is a positive thing, it will have to strike the right balance between providing sufficient protection and stifling the very thing that made cryptocurrency so popular.
Why Is Creating Crypto Regulation Challenging?
It has only been since 2021 that cryptocurrency has found its way into the mainstream.
Truthfully, the idea of cryptocurrency and blockchain technology is so new that there is no solid basis for making regulations.
While the would-be regulators are still trying to understand how cryptocurrency will impact the financial ecosystem, countless digital currencies are being produced. Businesses are finding ways to accept digital currencies.
Based on conversations on Capitol Hill, it seems that cryptocurrency regulation is not a matter of if but when.
The government is playing around with creating a US digital currency.
Regulation can bring stability to the crypto market.
But regulation will not be able to remove the volatile speculative nature of the investment.
For this reason, financial experts recommend that crypto investors limit their cryptocurrency exposure to 5% of their overall portfolio.
It is never a smart idea to invest in cryptocurrency instead of emergency funds or instead of paying off high-interest debt.
Using Regulation to Protect Crypto Investors
Currently, if people try to buy or sell cryptocurrency, they are participating in the Wild West.
Crypto investors have almost no protection.
There is a minimal regulatory framework to protect investors’ assets. The majority of trading in the crypto world has no federal regulation.
Regulation can make the market safer. Crypto will still be a volatile and risky investment.
However, investor protection could minimize outsider manipulation. The safer the market is, the more confidence investors have in it, leading to the market growing in value over time.
Regulation does more than improve crypto investor confidence.
It creates an environment where basic fairness reins.
This is a must if the crypto ecosystem is going to grow.
Make Crypto Safe for Everyone
As attractive as decentralization is, a lack of government involvement has led to many scams that have cost people millions of dollars.
Greater regulation and greater safety could mean greater possibilities for crypto investors.
Petr is a serial tech entrepreneur and the CEO of Apro Software, a machine learning company. Whenever he’s not blogging about technology for itechgyan.com or softwarebattle.com, Petr enjoys playing sports and going to the movies. He’s also deeply interested in mediation, Buddhism and biohacking.