Crypto Markets Regulation?

Disclaimer: The below article represents the author’s personal views alone and no one else. It is not meant to be taken as financial advice.

Bitcoin was the theme of the year 2021, as it reached a jaw-breaking all-time high of $67,000 and a market cap of a trillion dollars. As such, interests in Bitcoin and other cryptocurrencies skyrocketed, businesses accepting crypto as a form of payment increased, Bitcoin ATMs are cropping up in unexpected places around the world, countries making Bitcoin as legal tender such as El Salvador, with more to come. This has drawn the United States policymakers’ attention to this digital currency- Bitcoin, by emphasizing cryptocurrency regulation. The lawmakers’ discussions were centered mainly on investors’ rights protection, taxes, and other issues.

This is 2022, the debate on regulation is still going on among lawmakers. Although, many have expressed their dissatisfaction with the claim that regulation will defeat the intent behind cryptocurrency, which is Decentralization- which means no one controls it.

But with the look of things, regulation is imminent. With regulation, the government can make the cryptocurrency market safer for investors by enacting appropriate laws. If Bitcoin and cryptocurrencies are regulated, how prepared are you, or what should you expect?

The Need For Regulation

Money Laundering

Cryptocurrency is decentralized, unlike in the traditional banking and financial system, where the fulcrum of power is largely controlled by government or centralized authorities. Due to the decentralized nature of cryptocurrencies, it becomes easier for criminals and tax evaders to use crypto illegally.

Money laundering has become easier since large funds can be moved without the prior knowledge of centralized authorities; likewise, funds can be converted into stablecoins to avoid paying taxes.

Bitcoin’s regulation can ensure that users using crypto exchanges utilize their genuine identities trading, buying, and selling crypto. Replication of what happened on exchanges like Bittrex, where people used fake identities, will be prevented.

Cybersecurity

Billions of dollars have been lost from crypto investors because of the malicious actions perpetrated by cybercriminals and hackers. Just like hacking remains a serious risk to financial organizations like banks, it remains a serious risk to the crypto world likewise.

Governments can impose regulations requiring cryptocurrency exchanges to protect their users’ assets. In case of any loss of funds, investors will be able to resolve their concerns or recoup their funds.

Investors Safety

Cryptocurrencies are volatile, and as such, investors are always advised to only trade or invest the money they can afford to lose without regret. Bitcoin’s value, like most financial assets, is subject to price volatility and market manipulation. Over the last few years, the value of crypto assets has fluctuated dramatically. For example, Bitcoin’s price fell to $47,500 before rising to $57,500 after a few months, fell back then later to $67000 and now presently at $38,000. Manipulation is greatly influenced by whales (with a large holding of Bitcoin) can sell their holdings, thereby leading to a drop in price. Rumors and unverified news on social media can also affect Bitcoin’s price negatively.

With Regulation, laws needed to prevent whales’ manipulation and to ensure perpetrators of fake news are brought to book will be put in place.

Full Adoption

Despite the fact that the cryptocurrency industry is 13years old, there is still a long way to go for the general adoption of these digital currencies. Perhaps due to fear or to the premonition by many that a crypto crash is imminent anytime, mainstream adoption of cryptocurrencies is yet to be largely witnessed. Retail investors may be encouraged to adopt crypto if regulations are put in place since it will safeguard their interests and investments. Regulation will also boost investors’ confidence, as they must adhere to stringent compliance and risk management regulations.

Planning For Regulation

For Bitcoin and cryptocurrency traders or investors, there are some things you should do in order to get ready in case regulation is put in place.

-Investors must record taxable transactions involving their digital assets to the federal government. Profits and losses must also be estimated likewise. It’s critical to put in solid recordkeeping.

-You should choose a trustworthy cryptocurrency and portfolio management software application that tracks transactions, calculates gains and losses, and stores proof in order to accurately develop your tax profile and estimate your actual tax due.

-Correct details about your identity should be used on crypto exchanges

Final thoughts

While decentralization is praiseworthy, it is of great need for the government to regulate crypto. With comprehensive regulations, governments can create a safer ecosystem for everyone interested in investing in the crypto industry.

About Linear Finance

Linear Finance is a cross-chain compatible, decentralized delta-one asset protocol that allows users to get synthetic exposure to various assets, including cryptocurrency, commodities, and market indices. Users can utilize our cross-chain swap functionality to instantly swap assets across leading blockchain environments and DeFi protocols with unlimited liquidity and zero slippage.

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