Why cryptocurrency regulations help investors3 min read
When cryptocurrency regulations are mentioned, it usually evokes a negative emotion among crypto-enthusiasts. But in today’s article we will look at why cryptocurrency regulations can be beneficial not only for investors, but also for ordinary people.
Cryptocurrencies are often considered an alternative to fiat currencies. However, this is not entirely the case, as cryptocurrencies cannot directly compete with current currencies. Fiat currencies are regulated and have precise rules. Their exchange rate is not volatile compared to cryptocurrencies and people’s trust in these currencies is incomparable. Between the main advantages of regulation cryptocurrency therefore includes:
- Trust: The existence of cryptocurrencies is very young in terms of time, and therefore the trust of investors and ordinary people is not built up in this market. Most buy cryptocurrencies only for the purpose of quick speculative profit and do not address the real benefit of cryptocurrencies. The global regulation of cryptocurrencies would have the effect of increasing people’s confidence.
- Volatility limitation: Since cryptocurrencies are volatile, they bring the prospect of quick profit, but the risk of quick loss should also not be forgotten. Volatility is the attraction for ordinary people who enter the market. In the long term, regulations could limit this volatility.
- Protection against the risk of fraud: The digital space of cryptocurrencies is often a great ground for the implementation of various fraudulent projects. Strict regulations would be able to reduce the frequency of these frauds and thus many investors would avoid high capital losses.
- Adoption: Cryptocurrency adoption is directly related to trust. If a cryptocurrency is generally accepted, then at the same time people must trust it. However, when volatility is high, investor confidence in cryptocurrencies decreases. Subsequently, if their trust decreases, it has a direct impact on adoption. In other words, while cryptocurrencies are the currency of the people without global regulation, they cannot be an everyday currency used for common consumer purchases.
Cryptocurrency regulations will escalate
We recently informed you that G20 plans global regulation of cryptocurrencies in October. Until now, we have witnessed various regulations, but only at the national level. But everything is pointing to the fact that the regulation of cryptocurrencies will become a global concern. The need to regulate cryptocurrencies on a global level also stems primarily from the recent collapse of companies such as Terra or at present Celsius.
In addition, the correlation of cryptocurrencies with the stock market has increased in recent years, and despite the differences between the individual markets, many problems in both markets are very similar. He pointed it out FED which will also approach other regulations.
It is not an exception either ECB, which prepares the MiCA law within the EU. It is a package of regulations aimed at protecting investors.
It seems so the regulation of cryptocurrencies on a global level will increase. However, it could ultimately help cryptocurrencies, and some of the benefits we have outlined in this article could protect investors from major losses.
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