As cryptocurrency usage increases, so do cryptocurrency regulations around the world that are put in place to government them. The crypto landscape therefore constantly evolving and keeping up to date with the rules in different global territories isn’t easy.
Until recently, the cryptocurrency world was a wild west for regulators. However, as the industry has matured, there has been a marked change in perspective where policymakers are now much more engaged with the idea of crypto regulation and accept that not all crypto is “criminal money.”
This attitude shift is a sign of progress. But what does this mean for the future, and how can crypto companies be prepared for what’s to come concerning regulation and compliance?
To answer these questions, we engaged with some CryptoArena Research Team to provide insights into current regulation trends, the benefits of the new wave of crypto compliance, and what the future may hold for crypto companies looking to grow and scale.
Let’s dive in.
Governments in various developed countries are beginning to take control of the ownership, trading and mining of cryptocurrency. Regulation ranges from outright bans to tax legislation.
Altcoins have been around for a long time, but it is only now that the currency is entering the mainstream among merchants, consumers and traders. From some perspectives, the presence of a non-national currency independent of the state poses a threat to governments.
Why Crypto Regulation Would be Good for Investors?
We asked our experts in the CryptoArena Research Team for their take on the changing crypto regulatory landscape. Here’s why they say more regulation would be a good thing for long-term crypto investors.
Many parts of the world are already embracing crypto as a currency of the future. But the future is grim if the industry’s massive appetite for energy isn’t steered toward clean fuel sources.
Our climate can’t handle reviving fossil-fueled power plants that should be retired. Just like traditional mining, crypto mining takes a toll on our planet.
The masses of computer equipment required for crypto mining need fans to keep them cool. These can generate significant noise pollution that can be disruptive to nearby communities.
For example, many countries have banned or restricted crypto mining. China was previously the crypto mining centre of the world but in June 2021, the country banned all domestic crypto mining operations because of the massive energy demands.
Crypto’s energy demands may serve to extend the life of fossil power plants because few mining operations use clean energy, and few have pledged to do so. Governments could help by demanding that they turn to clean power sources.
Crypto regulations will make headway on retiring dirty coal plants. Some countries like El Salvador are already building their wind power resources on and offshore, and also encouraging citizens to work individually and in communities to tap solar power.
Crypto regulations assure that crypto companies prove their full value by using and helping to drive demand for clean energy.
More Stability in The Market
Regulating cryptocurrencies could be a healthy development for the industry, at least where everyday investors are concerned.
Greater regulatory guidance, if well targeted, could help reduce speculation among crypto assets. Less speculation can lead to higher investor confidence, which could draw in more long-term investors who have so far said no thanks to a highly speculative, volatile crypto market.
“Even if it doesn’t bring more people in, it may change people’s current behaviour,” says Klein.
Enthusiasts claim there are a lot of benefits cryptocurrency has over fiat currency and other asset classes, but those benefits can only come to full fruition “if an appropriate regulatory framework is put into place,” according to Klein.
It’s hard to predict how the price-sensitive asset class will react to regulation over the long term since it’ll depend on whether the U.S. government takes a more lenient or stringent approach.
In the short term, any new regulation could inspire knee-jerk investor reactions to the markets, suppressing the trading values of cryptocurrency. For example, when China banned cryptocurrency transactions in September 2021, cryptocurrency markets dropped. But over the long term, regulation may have the potential to stabilise the market and reduce some risk for cryptocurrency investors, says Greenberg.
To be clear, new regulations could slow the roll of those trying to get rich quickly by predicting the next coin that goes “to the moon,” she says. But that’s a good thing for long-term investors.
More People Will Use Cryptocurrency
Because cryptocurrency is still in its early development stages, not too many people are using it yet. If there’s proper cryptocurrency regulation, then more people will venture into the world of cryptocurrency and use them more often for transactions around the world.
The increased number of users would help stabilise the price of Bitcoin and other major cryptocurrencies around the world.
If a lot of businesses start accepting cryptocurrencies as well then this could help increase the price of major cryptocurrencies like Bitcoin and Ethereum which are currently experiencing high volatility in their prices.
One of the most important aspects of cryptocurrency that gets overlooked so many times is regulation. More often than not, your average Joe will have no clue about how different parts of the world handle cryptocurrency.
It’s becoming increasingly more obvious that more countries are looking for ways to integrate digital assets into their economy, using a regulatory framework as their tool to accomplish this. As we witness more laws being put into place to further protect crypto users and lower the risk of fraudulent and terrorism-related activity, be aware of how just one positive regulatory decision can significantly impact the rest of the market.