07 Apr Cryptocurrency Puts Regulators In A State Of Dilemma
We expect that the crypto regulations introduced in 2019 may well determine the future outlook of the crypto market as the disjointed nature of the crypto regulations globally, especially in the US, comes under scrutiny. crypto regulation-related news from the US revealed that regulators are showing a new level of urgency towards proffering solutions to the confusing state of its regulations.
In particular, the country’s Uniform Law Commission (ULC) stated that it is implementing new plans to review the existing federal regulatory framework on digital assets in place for state regulators to adopt or tweak. Furthermore, the body went on to advise that all ongoing regulatory reforms on crypto in the state level should be put on hold for now, so that they can conform to its proposed unified regulatory model.
Apparently, there is no way we would discuss the dwindling growth of crypto in the US without highlighting the devastating effects of regulations of this nation. The same is true for other regions that are yet to fully define customized regulations for cryptocurrency. For crypto firms in the US, there is little to cheer, especially if we consider the recent crackdown on ICOs, as each state has autonomous authority on regulatory issues. Therefore, they have to acquire a license from each state before they can offer their services and products with little or no restrictions.
Although the recent move by ULC would do enough to unify crypto regulations, yet, there are lingering concerns that the bad blood between federal regulators and the crypto space would have a say in the outcome of the revisory initiative.
Federal regulators in the US are yet to fully acknowledge the viability of crypto as well as present a universal stand on crypto related issues. Despite the peculiarity of the situation in the US, it, however, reflects the unconvincing stand of regulators in countries that are yet to fully define laws governing their various crypto space. Nonetheless, I believe that it is unfair to criticize the reluctance of these custodians of the law to accept crypto without touching on some of the factors that have initiated this nonchalant attitude and might continue to do so.
Why Are Regulators Unconvinced With The Crypto Market?
Decentralization And Anonymity
One of the core functionalities or selling points of bitcoin is its capacity to bypass the middlemen and offer participants to control the creation of new coins. Owing to the fact that a majority of other crypto either mimicked the design of bitcoin or upgraded it to some degree, decentralization has become the standardized functionality of crypto. While enthusiasts revel in the financial power crypto avails them, regulators and governments, on the other hand, are reeling its effect.
Apparently, the mainstream adoption of crypto robs them of their autonomous control over the creation of money, as well as its transfer, as they do with fiat currencies. Hence, many of the nations that have banned the asset are countries known to maintain a strong hold on the financial system of their economy. This, coupled with the fact that some crypto is pushing for total anonymity for their users threatens the very essence on which today’s global economy is built. Also, regulators have highlighted how anonymity in crypto transactions could attract nefarious entities and thereby aid money laundering activities.
Regardless of the security that crypto experts cite as a major benefit of using crypto, yet, the explosion of crypto thefts and hacks put into perspective the level risks and uncertainty that comes with owning digital money. Regulators are aware of this and have constantly pointed at security frailties as a factor responsible for their decisions to outrightly ban them or restricts their use. As such, it is certain that the global mainstream adoption of crypto hinges on the ability of crypto security experts to find lasting solutions to these menaces. Until then, the space would have a hard time getting regulators to support and legalize the crypto.
Although crypto is doing well in the popularity poll and we are witnessing an explosion of experts tackling and improving the technology, yet, its concept and operations remain a foggy subject to the average user. The same is true for regulators and this has dampened their interest in the nascent technology. While some have set up a different taskforce to investigate its nitty-gritty, others have chosen to “judge the book by its cover” and focus on the negatives.
You would agree with me that it is difficult and erroneous to classify and subject an asset that is vaguely understood under existing or new laws.
Fraud, Scam, And Manipulations
The volatility of the crypto market makes it a perfect breeding ground for speculative projects that often turn out as devious plans to extort unsuspecting investors of their funds. Therefore, the market is littered with cases of fraud and scams, which in turn, has had an adverse effect on the viability of crypto. Also, regulators in the US have expressed their concerns over the susceptibility of the market to manipulations. And judging from latest reports of volume manipulation on the part of crypto exchanges, this would continue to haunt the crypto space.
Regulations and crypto are at a loggerhead in some regions of the world and the factors highlighted above may or may not feature prominently in the legal conundrum limiting the adoption of the technology.