Can Cryptocurrency be Regulated?

Cryptocurrency market is relatively new and still maturing. Its largely unregulated currently, which is why its heavily manipulated. Even though, the basic premise of crypto-assets and blockchain technology is to create a decentralized, tamper-resistant and censor-free world. An unregulated market however is a double edged sword, while its free and operates without restrictions, however a lack of oversight and control can bring serious problems, as we are witnessing right now. Besides that, objectives of most crypto-assets don’t align with the interests of most governments and institutions, why is why regulations will be implemented. Yes, like all other things, cryptocurrency regulations can be implemented, up to a point. But what are the types of regulations that we should expect?

Exchange Regulations

Exchanges are where most regulations fall on or will be implemented later, as they are the points of trading and liquidity, where people go to trade assets and/or convert them back to FIAT money. They are required by major governments now to collect Know Your Customer (KYC) data to assign identities to random accounts and curb money laundering. The accounts which haven’t provided identity documents are limited, by the amount they can withdraw, in a day. Going forward, we should expect that exchanges will be required by most governments to share trading data and profits, so that gains and assets can be properly taxed.

Governments can also make exchanges safer by bringing them under the umbrella of the current financial systems, asking them to get insured and forcing them to improve their security. This will reduce the number of hacks, exit scams and provide protection to users, in case the funds are lost by the exchange. They should also be monitored for wash trading across trading pairs and asked to prove solvency to regulators and financial institutions.

Mining

A lot of cryptocurrencies operate on Proof of Work (POW) algorithm, which requires high computational power, expensive hardware and of course the latest hardware. These miners can be taxed by the governments directly and/or be required to pay special rates for electricity or for environmental matters. Similarly, crypto friendly governments can actually subsidise the mining activity, making it more lucrative for new entrants and existing ones. These regulations will definitely have an effect on the cryptocurrency prices.

Retail Usage

A big roadblock in the further development of cryptocurrencies, is the lack of day-to-day usage and adoption by common people. Government regulations can be imposed, allowing or curbing the use of cryptocurrencies by retailers and service providers. This will massively help or obstruct, the use cases and adoption of crypto-assets.

Institutional Usage

Financial institutions currently don’t engage in or allow the trading of crypto-assets. If new friendly regulations are brought and institutional investors are allowed to invest or engage in trading, this will help the whole ecosystem massively, opening it to new money, further development and recognition.

General Cryptocurrency Regulations

Other general Cryptocurrency regulations can include: Friendly governments declaring them as “legal tender” and choosing to receive taxes and payment for other services in cryptocurrencies, though it most probably will be in their own national cryptocurrencies. A few countries are developing special zones for blockchain development and giving incentives to do so. Also, regulation needs to be drafted for crypto-assets to be recognized in the court of law as an asset and in the case of a person’s death, it needs to be included in the inheritance category to be given to inheritors, under legal protection.