Crypto Regulations and the Road to Mainstream Adoption
How far have we come in terms of crypto regulations?
In this blog, we do a deep dive into the current status quo of crypto regulations in the United States and around the world. We explore what the road to mainstream adoption looks like.
Let’s get into it.
The Current State of Crypto Regulations
Bitcoin, the world’s premier, and most popular cryptocurrency was launched in 2008. In the these past 15 years, the U.S. has had three different presidents, two recessions, and even saw crypto reaching an impressive all-time high of $60,000 in 2021. You’d think that as the world’s largest economy by nominal GDP, we’d be at the forefront of developing regulations to govern the ‘currency of the future’, but alas.
The US digital currency regulatory environment is dynamic and ever-evolving. And, on account of the complex and uncertain nature of cryptocurrencies, the Securities and Exchange Commission (SEC) has adopted a Delphic strategy for regulations.
This means, instead of issuing comprehensive guidelines, they’ve chosen to take a step-by-step approach where they dole out singular enforcement actions. When the rules governing digital assets aren’t transparent, it opens traders up to potential SEC enforcement and hefty penalties. As can be imagined, this situation is incredibly frustrating for investors.
In other jurisdictions, countries like Japan have outright adopted blockchain-based currencies as legal tender, while some like China, have placed a total ban on their trade.
Over in Europe, countries such as Malta and Switzerland have chosen to strategically position themselves as crypto-friendly jurisdictions. Unlike the SEC, these nation-states have established explicit virtual currency regulatory systems, making them appealing hubs for crypto investors and businesses.
How Regulations are Shaping the Mainstream Use of Cryptocurrencies
Without concrete crypto regulations, rules, laws, and guidelines to ensure crypto corporations operate within approved standards and practices, the general public will be averse to adopting virtual currencies.
Regulation should exist as it will protect consumers, foster a safe and orderly way of doing business, and speak to potential risks and challenges. Without such protections in place, it’s a tough sell to get people on board with crypto.
Clear regulation gives investors confidence to venture into the crypto markets. However, finding just the right amount of regulation is going to be challenging for the SEC. You see, if the regulations are too strict (or unclear), this can limit the crypto industry and stifle innovation.
Furthermore, it’s in everyone’s best interests if regulations could be uniform across international markets. Because inconsistent governance leads to a fragmented market which makes doing business in various jurisdictions a nightmare.
Standardization may herald growth in the industry and open the door for people to be more accepting and willing to adopt virtual currencies.
The Bottom Line
Many at SEC perceive the cryptocurrency market as still in its infancy. However, what’s obvious is that crypto regulations are absolutely fundamental if there’s to be any hope of mainstream adoption by businesses and consumers.
To this end, all compliance mechanisms established by the SEC and parallel authorities globally need to be clear and consistent. The proposed laws should be able to protect investors while also encouraging innovation.
The introduction of solid regulation will bolster public confidence and can help usher digital assets into the mainstream, rendering them an attractive alternative to orthodox financial instruments.