Cryptocurrency regulation pros and cons
Cryptocurrency market cap shrank by over 50% in May after several negative market events caused it to recoil violently after years of rapid growth. The market wiped out $2 trillion in the pullback, which also exposed some of its biggest vulnerabilities. An example of this was the reckless use of leverage in historically volatile markets. As leverage is mentioned, Margin trading comes to mind, which is a trading strategy that allows you to borrow funds from an exchange to open positions that are larger than those you have on your account. Traders use different margin strategies when trading cryptocurrency: isolated margin and cross margin. So isolated margin vs cross margin is something you should learn in this regard.
Regulation of cryptocurrencies is nowadays a hot topic in the cryptocurrency world because investors are at risk of trading recklessly. But it has both advantages and disadvantages.
In this article we will discuss about cryptocurrency regulation pros and cons.
What is Cryptocurrency regulation?
Cryptocurrency regulation has been a source of controversy among investors. While supporters of the business world argue that regulation is good for society, others believe it would destroy the market for cryptocurrencies. The crypto industry has a lot to learn about how regulations affect businesses.
Cryptocurrency regulation refers to laws and regulations imposed by governments and other governing bodies like central banks or financial regulators on cryptocurrency users and businesses. The legal status of cryptocurrencies varies substantially from country to country and is still undefined or changing in many of them.
Regulation has caused a recent decline in cryptocurrency prices, leading some investors to suffer substantial financial losses. The market's instability makes it tough for novice traders, but not impossible. Many traders rely upon renowned sites for expert consultation:
- Bitcoin Up
- Coinbase
- Binance
If you want to secure your financial asset, Margex will help you. This company provides the best trading solution and easy-to-use platform. At any time, you can buy or sell the most popular cryptocurrencies, including Bitcoin, Litecoin, Ethereum, etc.
Regulation of cryptocurrency: Advantages
If you're curious about the advantages of regulating the bitcoin market, check out these benefits.
1. Minimize cheating
The crypto market has produced many millionaires, but it also has been riddled with scams that are costing consumers millions of dollars. Due to the unregulated nature of this industry, scammers have introduced a number of scam coins that they sell at an inflated price and then abandon once investors buy them. For this reason, regulation of cryptocurrencies has enormous potential to boost the market for new coins.
2. Obtaining institutional funding
Would you list a billion-dollar fund on a cryptocurrency exchange? There's a good chance you'll turn down the offer. That's because an unregulated market is susceptible to flash crashes. And you could be held liable if something goes wrong with your investors' money.
Consider for a moment that you are the director of a mutual fund in charge of managing investor assets totaling billions of dollars, the majority of which is retirement money. However, institutional investors would be more likely to invest in cryptocurrencies, if there were a regulated market with well-defined operating frameworks. The market would improve, making liquidity levels rise.
3. Moral Reputation
Many people believe that bitcoin was created by criminals because it is the first cryptocurrency ever invented. The first assumption people made about bitcoin was that it would be used to buy drugs and other illegal items on the dark web. However, as its price rose in 2017, this assumption began to change. Even today, some countries refuse to recognize cryptocurrencies as legitimate financial instruments.
Regulation of cryptocurrencies: Drawbacks
Despite the advantages of cryptocurrency regulation, it's important to consider the downsides as well. Check out this list of drawbacks for more information.
1. Threat of capital flight
Cryptocurrencies are gaining popularity because people want to control their own assets without having to rely on banks or governments. Bringing government regulation into the market would pose a threat to cryptocurrency. Because it shifts its focus away from individual freedom. Therefore, there would be a flight to safer investments and little use for assets whose purpose was uncertain.
2. Unsatisfactory user experience
To buy and sell cryptocurrencies, follow these steps: first, register for an account using your email address; second, complete transactions instantly.
A regulated cryptocurrency market, on the other hand, would streamline client verification processes. It requires greater identification from issuers before allowing them to use the platform.
3. Skipping important projects
While compliance requirements do lead to more high-quality projects overall in the crypto sector, they also exclude ventures. It may be equally as promising but doesn’t have enough capital.
ICOs are a way to raise money for startups by selling their own cryptocurrency. Using the new coins or tokens, investors can make payments to others.
Conclusion
The Bitcoin mania has the potential to upset monetary policy around the world, because of its diverse and conflicting viewpoints. The crypto community is currently divided over whether or not to regulate the space. The cryptocurrency market is expanding rapidly, with new coins being created every month. The regulatory framework around cryptocurrencies is still developing, making it a cat-and-mouse game.
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