Financial institutions and government agencies have been talking about enhancing the regulation of the crypto space since the very appearance of blockchain. Though the industry and people were skeptical about it as they saw a particular benefit in crypto being completely free from any external influence. It was not until the recent FTX scandal, which led to many people losing trust in digital assets, that companies started rethinking their approach to regulation of the space.
Why do we need to see crypto regulated? First of all, the issue with FTX proved that even major cryptocurrency exchanges with over one million users are susceptible to unexpected bankruptcy. This case also demonstrates how easily both investors and ordinary users can be misled and encouraged to believe in a company when in reality they should be very careful about trusting them their own personal data and finances. If external regulators had access to FTX resources, they would spot the issue in its wake and people’s money would be safe.
It is clear that in the current state of the crypto industry consumers are under-protected. They lose their assets when exchanges go bankrupt; when hackers find leaks in smart contracts and seize their money; when malicious people create complicated fraud schemes; when crypto companies aren’t transparent enough about their processes. The list is endless. Cryptocurrency has all it takes to become a major part of people’s lives and the global economy if only it was more secure. A lot of crypto enthusiasts argue that regulation leads to blockchain’s ruination but it is essential if we want Bitcoin and Ethereum to gain popularity among the entire world.
The under-regulation of crypto has already led to it being banned in many countries, like, for instance, China, Egypt, Qatar, and so on. Others, like Georgia, Lebanon, and the UAE introduced implicit bans which do the same, albeit not officially. These countries constitute a big part of the global economy. They export natural gas and oil, clothes, food, and import goods from the EU and the US. Huge money transactions circulate between these states all the time due to new contracts and deals being signed. It would be a big step for crypto to become a part of their financial systems. However, with the Governments there trying to get the economy firmly under their control, it’s obvious this won’t happen unless they’re able to control crypto as well.
The problem with crypto lies not just with the usual frauds and scams. It can go as far as to have a major negative impact on the global economy and ruin the macroeconomic policies of various states. Cryptocurrency is already widely used by Russians and Iranians to circumvent US sanctions. It is also a major tool for people to move their money to another country against all the actions by their Government taken to preserve these funds inside its borders.
According to The Financial Times, special attention should be paid to digital financial assets that are said to be dependent on real-world currency, like stablecoins. They are argued to be the safest way to invest in cryptocurrency but governmental control and regulation are required to ascertain this claim.
Certain measures are already in development to introduce a more transparent approach to cryptocurrency. However, it is important to be careful with taking steps to ensure crypto is under control. The main attractive feature of it is the freedom people and businesses feel when using it. It must be preserved to some point so that the digital space doesn’t lose its value on the market.
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