Regulation in Cryptocurrency market

The regulation of cryptocurrencies is the best thing that could happen to the market.

Regardless of the corner of the planet from which you operate, the regulation of cryptocurrencies is already a fact, something that was seen coming from the moment in which the crypto sphere and blockchain technology took the great leap, going from a barely visible corner of the internet to occupy the big headlines every day. Institutional economic agents, such as multinational banks and funds, invest in cryptocurrencies, and we could say that the different countries are the most powerful economic actors, although they are also the laggards to enter the crypto sphere. While Bitcoin (BTC) and company may be seen as a threat to the state, there is a way for both to benefit from each other, so traders need not fear regulation.

The United States House Committee on Financial Services, which last December debated the larger issue of cryptocurrency regulation, is now turning its attention to stablecoins as a vector toward such regulation. At the time of writing this article, the debate is centered on deciding whether stablecloins will be regulated at the federal or state level. Regardless of the Committee’s decision in this regard, the move itself is but an indication that attitudes towards digital currencies will continue to improve, and their adoption will continue to grow. Missouri House Representative Blaine Luetkemeyer stated that while there are many cryptocurrencies that could threaten dollar supremacy, dollar-backed stablecoins offer a “unique opportunity.”

The US is not the only country considering regulating cryptocurrencies, but the truth is that, as a world power with great influence over global markets, the position taken by the US government will undoubtedly set a pattern for many others. countries. For its part, China is creating a much stricter framework, marked by the severe measures adopted and the development of its own digital currency issued by its central bank, or CBDC. Several countries are also trying to enact laws to control the creation and use of digital currencies, and the distance between the measures enacted by different states around the world gives rise not only to some uncertainty but also to various opportunities.

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What about taxes?

Considering the huge amounts of money that have been made thanks to the crypto sphere, it was inevitable that governments would try to tax such profits. The Indian Ministry of Finance has announced the launch of its own CBCD projected for the end of the year or next year, in addition to a new tax on cryptocurrencies of 30%. The growing embrace of cryptocurrencies has prompted Colombian tax authorities to take a tough stance on tax evasion, while the Venezuelan government intends to impose a 20% tax on cryptocurrency transactions. Although the purpose of taxes is the common good of society, not all traders will be happy that their governments keep part of their profits. So that,

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Greater adoption brings greater opportunities

The previous legislative vacuum made digital currencies a huge draw for innovators and people on the fringes, but it also attracted illegal actors. This, coupled with the conservative nature of financial institutions, slowed the growth and adoption of cryptocurrencies around the world, as investors stayed out of the risky asset sector. However, the value of the crypto sphere as a whole is often driven by interest among institutional investors, and by the creation of blockchain solutions that integrate the traditional financial system (such as DeFi projects based on XRP or Ethereum ).and CBDC). If we want to see new blockchain projects help transition economies based on old systems to new systems, a legislative framework will serve to create a much-needed bridge.

In fact, the crypto community can thrive in an environment marked by regulation. Take Singapore as an example, where cryptocurrency-related investments increased more than 10-fold to $1.48 billion last year from $110 million in 2020, despite a tough stance taken by the central bank. of the country in terms of cryptocurrency advertising and issuance of business licenses. Rather than inconvenience businesses, cryptocurrency regulation could give investors and startups the security they need to operate and create new blockchain projects that can become interesting assets to trade.

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Less volatility and uncertainty

Market volatility may present some advantage to speculators, but in the long run, more stable investments can bring higher returns. Uncertainty and contradictory legislation can drastically affect the crypto market, as happened with the recent restrictions introduced by Russia and especially by China, whose ban on mining operations has been decisive in the collapse of the crypto market.

The solution may be well-defined and coherent regulation that leaves aside the absolute prohibition of the sector. Let’s take Kazakhstan as an example, a country to which many miners moved their operations as a result of the restrictions introduced in the Asian Giant, and which has opted for a different option than the indiscriminate prohibition of crypto operations that involves the creation of a tax on mining equipment, as well as an increase in prices for mining operations. Such a commitment could help the mining industry find a stable base for its operations and thus avoid major disruptions during the exodus from China.

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Consumer protection

With the expansion of the crypto sphere to all corners of our lives, scams and fraud have also spread and multiplied: from using fake email addresses, through the “rug pull” scam to fake NFTs to scam artists, the reality is that cryptocurrency transactions are irreversible, difficult to trace and operate within a somewhat uncertain legal space, which has meant great losses for some.

In order to have resources and offer consumer protection, cooperation with governments is essential, which entails accepting certain regulations on the matter. The cryptocurrency industry is aware of this and has created associations such as the Cryptocurrency Compliance Cooperative, or CCC, to work with government authorities to create standards within the industry to combat market manipulation.

Public authorities already have an active role in the fight against crypto crimes, as evidenced by the fact that US authorities have seized $3.6 billion worth of Bitcoin, linked to the 2016 hack of cryptocurrency exchange Bitfinex. If we want cryptocurrency users to have any kind of legal protection against criminal actors, the crypto community must also avail themselves of the rule of law.

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How to prepare for the next stage towards cryptocurrency regulation

A smart cryptocurrency trader will stay abreast of international news and government activity, just as he or she stays abreast of market trends. The time has come to anticipate future regulation and accumulate cryptocurrencies before the potential demands of governments become too costly, and also to try to predict which currencies will benefit from the support of some countries in the crypto sphere. In both cases, Binance puts at your disposal the best tools for cryptocurrency trading under any circumstances, including low commissions, a free Bitcoin cloud miner and advanced analysis in its intuitive all-in-one platform. Are you ready for the new crypto era? ¡Sign up to Binance in a few seconds and increase your profits!