Some describe the cryptocurrency market as a lawless unknown, and the best way to combat this is through increased regulation. In an attempt to bring crypto to the mainstream and expand its reach beyond professional financial traders, it is crucial to explain how these institutions operate and alleviate concerns about their uncertainty.  

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The Russian government just announced a plan to increase regulation on cryptocurrency transactions and service providers. This is a marked improvement over initial proposals, which bordered on outright prohibition. And while the regulations set forth by the Russian government are imperfect — first attempts at regulating new and volatile markets rarely are — but it is indicative of the enormous need there is in regulating this field. Governments around the world are in the process of discussing options for regulation.

Even in Washington, D.C., there are ongoing discussions about regulating the cryptocurrency market, specifically stablecoin. And stablecoin is even less volatile than most cryptocurrencies, so regulating the more unstable Bitcoin and other major cryptocurrencies is even more important. Critics of regulation argue that the fundamental principle of cryptocurrency is that it is a decentralized system, free of the potential for banks or governments to bring about inflation. However, a lack of regulation in such a decentralized system creates danger for its users.

Benefits of crypto regulation

One of the main benefits of regulation of the cryptocurrency market would be an increase in the security of transactions. Although there is built-in verification in blockchain-based financial technologies in the form of mining, more can be done to avoid fraud issues, like broker fraud, market manipulation, and other crypto schemes. Fraud will happen in any economic system, but regulation is an essential tool to limit how widespread it becomes and ensure that those who use the system properly can continue to do so with minimal risk.

It is important to remember that while cryptocurrency is a form of currency, it behaves similarly to the traditional securities market. However, the conventional securities market is heavily regulated by the government. Certain provisions are in place to prevent individuals working in the financial sector from engaging in conflicts of interest regarding traditional securities, but not with cryptocurrencies. Regulation of conflicts of interest in the crypto space will promote a safer environment for these transactions to occur.

Another benefit of cryptocurrency regulation is that it standardizes the technology used in cryptocurrency transactions. By forcing crypto service providers to adhere to minimum standards imposed by the government, regulation ensures that no individual is at a disadvantage when it comes to having the opportunity to participate in crypto exchanges. Especially given that technology in the cryptocurrency market is changing so frequently, it is vital to have this step towards access at every level.

The process of regulation also inherently encourages innovation. Regulation is designed to optimize the productivity and efficiency of operations, mainly through competition. This increased competition in the crypto field encourages leaders to develop new technologies to make the experience of cryptocurrency exchanges more streamlined for users. As recent years have seen cryptocurrency enter the mainstream, technological developments have helped bring this world to the masses. Future years will likely see this trend continue to grow.

As these features of safety and accessibility increase, it is within reason to expect that more users will adopt cryptocurrency. Regulation promotes important factors which are likely to subside the anxieties of casual traders who are hesitant to enter the crypto field. As such, it should be a priority for governments to step up when enacting crypto regulations, and it is the responsibility of crypto advocates to support and promote these new initiatives.