Cryptocurrencies are gradually becoming mainstream across the globe with market capitalization nearing the 200-billion-dollar mark. What can regulation do for the industry?
When the cryptocurrency tsunami made landfall in the winter of 2017, it took the world by storm. It would appear that too many people, they thought it was a fad that would fade. However, two years since the initial bull run and surge in bitcoin value, it now looks like cryptocurrency is here to stay. Despite the long crypto winter that only receded in 2019Q1, the demand for cryptocurrency is still robust.
What gave Rise to the Demand for Regulation?
The upheaval arose against cryptocurrencies when the deluge of ICOs swept through the globe like wildfire. The rush of ICOs looked too good to be true, and in a short while, with reports of failed and dubious schemes, a new song emerged. It was the song of disapproval and calls for regulation. The blockchain came as a novel idea, and it did seem that the world was ill-prepared for it.
Just like the early days of the Internet, blockchain emergence led to a need for specialty to be developed and knowledge disseminated. Before regulators could develop a framework, they also needed to know what it was all about. So, despite the early calls for the prescription of cryptocurrency, many national governments pondered on what was the best step to take.
The initial hammers on ICOs were made on autocratic climes like China, and in no time, other countries began to develop a framework. So, what has been the journey so far? While a few countries have taken steps to define how cryptocurrencies would be governed in their jurisdictions, others are still working it out.
What form of Regulation?
In defining what form regulation should take in the cryptocurrency world, many options have been bandied. What is the best approach? How can unscrupulous schemes be eliminated? Why a greater part of the democratized world still allows crypto operators to have a field day, the citizens who patronize ICOs have become wiser without regulations in place. Even Crypto exchange platforms have begun to insist on KYC and anti-money laundering provisions as they sign -on new customers.
How has the Landscape Changed?
In looking at the cryptocurrency landscape, what has become clear is that publishing a wishy-washy whitepaper is no longer enough. Most crypto buyers are better illuminated today than two years ago. Now, people would care to ask questions like:
· Who is behind the project?
· What are your use-cases?
· What is the business plan?
· Are there enough grounds to believe this is viable?
Questions like the above have emerged as people have interrogated what transpired in the ecosystem in recent months. So, while it is obvious systemic regulation or buyers’ education has heightened, there is still room for regulatory guidelines. It is obvious that just like no segment of national life should be left unregulated, some specter of regulation has to be in place. This is necessary for a view of the contents of the next section.
What can Government Regulation do?
What regulation can lead to in the crypto space can be predicted to a certain degree. However, it is also noteworthy that the blockchain space cannot be tightly regulated. By setting minimal frameworks that can guide the operation of cryptocurrency, better results and a guided efficiency will result.
Cryptocurrencies for global business have emerged in recent years, and all that cannot be wished away. Ripple has crashed the cost of global money transfers; Bitcoin has led the revolution as an alternative means of global e-commerce settlement. The gains can be built upon with clarity of operations and mode of reporting getting better clarity.
Weeding out the Bad Eggs
In every nation, it can be clearly stated that offers of cryptocurrency projects should meet minimal standards. This is important in order to protect citizens from exploitation. Taken that in the early days little was known about cryptocurrency, now that the loopholes are becoming evident, regulation can set in. ICOs are largely driven by the blockchain, and to a greater degree, it cannot be controlled.
The example of Hong Kong is a harbinger that bodes well for everyone. Anyone offering a security token is required to be registered with the country’s securities commission. This further makes it more difficult for fraudsters to scale the hurdle. Moreover, it is also required that only professional investors are allowed to buy security token offers. In other words, only people who can scrutinize the offer documents can participate in token offers.
While the conditions introduced in Hong Kong might look tough, it is worth the while. Protecting ordinary citizens from scams is not easy, but with such steps, their exposure can be limited.
What about Cross-Border Offers?
The blockchain is run on the framework of cyberspace and this means that it transcends national boundaries. However, to fight unscrupulous elements, publicity can be blocked for unregistered offers. The bulk of blockchain transactions are also traceable with the blockchain explorer. So, adequate steps can be taken to clamp down on wallet addresses used for unlicensed IPOs. Transactions from them can be publicized and blocked on global exchanges.
The totality of steps taken to introduce basic requirements that have to be adhered to for ICOs and STOs, largely bode well for everyone. Already in America, the Securities and Exchange Commission has been deciding on applications for cryptocurrency business on a case by case basis. Clearly, the unfolding regulations will make it harder for scam artists to proliferate in the crypto space.
Is Cryptocurrency Legit?
The truth is that with the scrutiny of cryptocurrencies in the past two years, it has become clearer that space is legit. Cryptocurrency is no scam, but fraudsters can scam a lot of people in the space. Considering Warren Buffett’s Statement on Bitcoin that it is largely driven by the fear of missing out, should it be outlawed? Well, the Oracle of Omaha did not say that cryptocurrencies are fake, what he said was that the hype is misplaced. So, there is an underlying value in cryptocurrency if is regulated.
There is no doubt that regulating cryptocurrencies will provide a healthier framework for all stakeholders. With more disclosure on those behind a project and a regulatory requirement for periodic filings, all else will begin to fall into shape. The future of cryptocurrencies looks bright with minimal regulation.