Home Ethereum Crypto regulation is actually a good thing for investors. here’s why

Crypto regulation is actually a good thing for investors. here’s why

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Crypto regulation is actually a good thing for investors.  here’s why

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Cryptocurrency regulation can be a controversial topic, but many experts say crypto investors should welcome it.

For starters, more regulation could mean more stability in a notoriously volatile crypto market. “Regulations will come and they will have to come at some point, which would further stabilize the market,” says Tally Greenberg, business development manager at Allnodes, a platform that provides hosting, monitoring and staking services. . “It protects investors, so that’s a good thing. That’s not a bad thing.

Still, many cryptocurrency enthusiasts vehemently oppose the new regulations. They say it would hinder innovation and go against the spirit of cryptocurrency, which emphasizes decentralization at the grassroots.

For those anti-regulation crypto enthusiasts, the decentralized nature of digital currencies like Bitcoin – which, unlike traditional currencies, are not backed by any institution or government authority – is a big draw. So, from this point of view, any new regulation would pose a threat to decentralization which is a feature rather than a bug.

According to Aaron Klein, Senior Research Fellow in Economic Studies at the Brookings Institution, the new regulations also have the potential to protect long-term investors, prevent fraudulent activity within the crypto ecosystem, and provide clear guidance to enable businesses to innovate in the crypto economy. , focused on fintech and regulation. But future regulations will have to strike the right balance, he says.

“Really, you kind of have three options: no regulation, bad regulation, good regulation,” Klein says.

What’s next for crypto regulation?

While a rise in the widespread adoption of crypto in 2021 has led to an ongoing debate over the role of government in this largely unregulated industry, clear rules are still being crafted. This has left the industry guessing as thousands of tokens and digital currencies are introduced, and new companies and platforms emerge to help store and trade them.

“The policies haven’t been designed yet, because there’s no precedent to blockchain and crypto, so it’s a hell of a job,” Greenberg says. “I understand why people are lingering over it, but something has to happen soon.”

Recent conversation on Capitol Hill suggest that it’s not a question of whether new regulations are coming, but when. President Biden has signed a new crypto legislation related to taxes in the $1.2 trillion bipartisan infrastructure bill late last year. And the Federal Reserve is toying with the idea of ​​issuing a US digital currency.

The Fed published a long-awaited report in January, exploring the costs and benefits of a government-issued digital currency. The report ultimately postponed a final decision on whether to move forward, and the Fed is giving the public and other stakeholders until May 20 to provide feedback before taking further action. Stable Coins are also a hot topic, and many experts predict this will be the first type of cryptocurrency to regulate.

Although new regulations have the potential to bring more stability to the crypto market, it is still a highly volatile and speculative investment. This is why financial experts advise most investors to limit their crypto holdings to less than 5% of their portfolios and never invest in crypto at the expense of saving for emergencies or paying off debt. high interest rate debt.

Why Crypto Regulation Would Be Good for Investors

We asked experts for their perspective on the evolving crypto regulatory landscape. Here’s why they say more regulation would be good for long-term crypto investors.

1. More stability in the market

Cryptocurrency regulation could be a healthy development for the industry, at least for ordinary investors. Stricter regulatory guidelines, if well targeted, could help reduce speculation among crypto assets. Less speculation can lead to greater investor confidence, which could attract longer-term investors who have so far said no thanks to a highly speculative and volatile crypto market.

“Even if it doesn’t attract more people, it may change people’s current behavior,” Klein says. Enthusiasts claim that cryptocurrency has many advantages over fiat currency and other asset classes, but these advantages can only be fully realized “if an appropriate regulatory framework is put in place”, according to Klein.

It is difficult to predict how the price-sensitive asset class will react to regulation in the long term, as it will depend on whether the US government adopts a more lenient or stricter approach. In the short term, any new regulations could inspire investor knee-jerk reactions to the markets, stripping the trading values ​​of cryptocurrency. For example, when China banned cryptocurrency transactions in September 2021, cryptocurrency markets plummeted. But in the long term, the regulation could have the potential to stabilize the market and reduce some risk for cryptocurrency investors, says Greenberg.

To be clear, new regulations could slow the turnover of those trying to get rich quick by predicting the next coin that will go “to the moon,” she says. But it’s a good thing for long-term investors.

“Slowly but surely, not only are we gaining massive adoption as an industry, but we are also more or less stabilizing. Regulation will further stabilize the market,” says Greenberg

2. Increased investor protection and confidence

Crypto investors currently have little or no protection in the market, as there is no regulatory framework in place to ensure asset protection.

Some exchanges maintain compliance with evolving federal and state regulators in the United States. This includes many established, high-volume US exchanges, such as Coinbase and Gemini, but they are not regulated in the same way as public exchanges or alternative trading systems. That can be problematic, according to Timothy Massad, former chairman of the Commodity Futures Trading Commission and senior fellow at Harvard University’s Kennedy School of Government.

“Most of the exchanges taking place in the crypto world today are not regulated by any federal authority, and that’s a big shortcoming,” Massad says. “That means investor protection is much, much weaker on these major exchanges than it is on our securities markets or our futures market.”

That’s why regulation is needed to make the market safer, says Klein. Crypto is likely to remain a risky investment, like individual stocks, but investor protections could make the market less vulnerable to outside manipulation. Safer markets can increase investor confidence, which often means greater value over time.

“[Regulation] is important for investor confidence. It’s important for grassroots fairness, and ultimately it’s important for the growth of the industry,” Klein says.

3. A safer crypto ecosystem

Crypto has been described as the “Wild West” by SEC Chairman Gary Gensler due to lack of regulation in the industry. The absence of laws and policies in this burgeoning field has created an opening for widespread fraud, scams, carpet pullsand market manipulation.

“Crypto is not subject to requirements to prevent fraudulent manipulation. He is not subject to conflict of interest standards,” Massad explains. “What I mean is just that we don’t have the same kind of standards that we have in other markets. Today, that basically means buyer beware.

Crypto crime has increased dramatically over the past couple of years. Scammers took $14 billion worth of crypto last year, a record high compared to the $7.8 billion taken by scammers in 2020, according to a report by blockchain data company Chainalysis. And there are over 17,000 altcoinswhich are generally even more volatile and speculative than Bitcoinand come with a higher risk of crypto scams and frauds. Even the most advanced and enthusiastic cryptocurrency experts understand that there are many new and evolving risks in the crypto world right now.

But there are several ways to protect your crypto. To start, watch out for some common red flags that look like the classic bank transfer scams and credit card fraud, such as obvious misspellings in emails or social media posts that promise to make you rich, or even large-scale crypto schemes on social media known as carpet prints.

To protect your digital wallets from hackers, practice good digital security habits such as using a hot or cold wallet for added security or to keep your crypto on an exchange with robust security. It is also extremely important to keep track of your wallet key and not show it to anyone. Losing or having your key stolen could mean losing your crypto completely.
“As much as I love decentralization and the absence of government [involvement]I’m glad they’re paying attention, because unfortunately with cryptocurrency, there are a lot of scams,” Kiana Danial, author of “Cryptocurrency Investing for Dummies,” recently told NextAdvisor.

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