Cryptocurrency has been a hot topic in financial circles for over a decade since Bitcoin first joined the scene in 2008. Digital currency was controversial from the start, offering financial transactions to anyone with an internet connection. The fact that the currency had no financial basis and the market had absolutely no oversight only added to its romantic appeal.
Today regulators are starting to circle in the cryptocurrency waters. Some crypto aficionados are unhappy with this, crying that the very fact that it is unregulated is what makes crypto great. Other investors are welcoming it.
Why Has There Been No Regulation for Crypto?
Cryptocurrency began around 2008 as an unbacked digital currency, encrypted and decentralized, and used by anonymous users over the web. It was not reliant on any central authority, such as a government or a bank, to value it or maintain it. It has designed to and always has operated outside the political structures that governments rely on.
Why Do Some Users Want Crypto To Remain Unregulated?
Some users like the facets of crypto that are created by the fact that it has no regulation. Crypto is completely anonymous to own. Trades are totally private, and no authority anywhere can see them or restrict them. Additionally, cryptocurrencies allow some users to bypass unstable government situations, as in Africa, to be able to procure necessary goods and services.
Other concerns are that it might hinder innovations being made to the international marketplace; that anything that threatens the decentralized nature of crypto would by definition change it into something else entirely.
Why Do Some Experts Believe Regulation Could Help the Crypto Markets?
Some experts believe that regulation would help stabilize crypto markets, making cryptocurrencies easier to trade. Some stablecoins like Tether and USD Coin Exchange have already moved toward regulation techniques like tying their value to a fiat currency, in these cases the US dollar, in order to achieve stabilization for themselves. More regulation would help make that happen for the whole category.
New regulations could help prevent fraudulent activity, and potentially keep new investors protected from scams. Additionally, clear regulations could provide necessary guidance to keep cryptocurrencies innovating in fruitful ways that are consistent with the goals of an international marketplace.
Is Regulation Going To Happen Soon?
It does not look like regulation for the industry is imminent. For one, without a central processor or institution responsible for trades and markets, the unregulated sector is hard to wrap arms around. While governments would like to participate in regulation it is still unclear as to how that would or could happen.
Because blockchain and crypto have never been regulated in any way, there is also no precedent set as to how to fairly regulate it. Any new rules and structures would have to be developed out of thin air.
There are indicators that regulation is on the horizon. President Biden signed off on crypto legislation taxes tied to his bipartisan infrastructure bill in 2021. The Federal Reserve has indicated an interest in issuing a United States digital currency as well. It seems it is not a matter of if, but when, regulation will begin.