Despite being in the market for more than a decade, Cryptocurrencies are yet to be recognized by most countries. The reason for that is pretty straightforward; Governments are not willing enough to allow a decentralized currency in the financial system.
Governments fear that these decentralized currencies can take the place of the mainstream current, and they will lose control over the traditional financial system.
After the launch of the first Cryptocurrency, Bitcoin, experts started speculating that it has the potential to offer financial solutions to modern financial problems. It is believed that with Cryptocurrency, complete financial transparency can be achieved.
The complete transparency may pose a threat to the concerned authorities. In spite of institutions being negligent about their existence, Cryptocurrency became the top digital asset and a standing medium to make business transactions.
Cryptocurrencies And Its Regulations:
As we know that with traditional financial transactions, we need a third party to complete the whole process. But in the case of Cryptocurrencies, there is no third-party involvement. There are just the sender and receiver.
The transaction happens over peer-to-peer networks. Before the transaction is completed, the whole transaction is validated to ensure that everything is happening right.
When we talk about regulation, we are talking about a more controlled environment. We are talking about a network that offers its services for Cryptocurrencies governance. The government is yet to come up with a concrete regulation plan.
While some places have allowed the regulation of Cryptocurrencies, some places have completely shut their doors. However, after seeing how Cryptocurrency performed in the last two years, most countries have initiated their plan to launch a Cryptocurrency of their own.
Why Do We Need Regulation?
The barrier towards regulation is the decentralized nature of Cryptocurrencies. Institutions believe that uncontrolled mechanisms will only lead to money laundering and evading taxes. In addition to that, there are chances that it can be used as a terror investment or other catastrophic scenarios, which is unacceptable.
Furthermore, institutions believe that the volatility of Cryptocurrency is too high to be considered currency. Well, that was the dark side of Cryptocurrencies. But we mustn’t forget that just because it has a dark side, it doesn’t have any other side.
Here we will discuss the disadvantages of Cryptocurrency regulation and try to prove why the regulation can revolutionize the traditional financial system.
1. Protection To Investors:
Though Cryptocurrency entered the market as one of the alternatives of fiat currencies. Over the years, it has become one of the most invested assets. The volatility of Cryptocurrencies has allowed the user to make profits out of the volatility. Hence, having a regulatory frame will allow the inventors to feel more safe and comfortable while investing.
2. Combat Illegal Activity:
Every day we find news about money laundering cases and realize how much of a fraudulent prone court traditional financial system is. Due to a lack of complete transparency, these kinds of events have become a norm. However, with Cryptocurrency and blockchain technology in place, every transaction is transparent.
3. Hold Potential To Mainstream Adoption:
There is an increased interest by the investors and are willing to invest in Cryptocurrencies as one of their assets. This is making the market more flexible in accepting Cryptocurrencies.
Furthermore, Bitcoin and other Cryptocurrencies are considered to be a hedge against inflation. As a result, investors are looking more closely at the whole Cryptocurrency thing.
4. Solution To Existing Regulatory Patchwork:
We have been using the same old traditional financial system for the last two thousand years. Have we able to make a system that is completely transparent and does not allow any fraudulent activity.
No! That has not been the case. Over the last decade, there have been billions of dollars lost in fraudulent activity. However, if we start regulating Cryptocurrencies, we will have a solution to the problems we are currently facing in the traditional finance system.
There you have it; we have placed everything on the table for you, and now it is up to you to decide whether cryptocurrencies should be regulated. Cryptocurrencies are finally getting support from large organizations. Seeing how these organizations are supporting Cryptocurrency, the regulation might not be far away.