{"id":21606,"date":"2023-02-24T19:34:24","date_gmt":"2023-02-25T03:34:24","guid":{"rendered":"https:\/\/coinnetworknews.com\/change-lies-ahead-for-haphazard-crypto-regulation\/"},"modified":"2023-02-24T19:34:24","modified_gmt":"2023-02-25T03:34:24","slug":"change-lies-ahead-for-haphazard-crypto-regulation","status":"publish","type":"post","link":"https:\/\/coinnetworknews.com\/change-lies-ahead-for-haphazard-crypto-regulation\/","title":{"rendered":"Change lies ahead for haphazard crypto regulation"},"content":{"rendered":"
The World Wide Web, as its name implies, is borderless, and so is crypto. The internet and cryptocurrency\u2019s common ethos is wide-open communication and exchange, unimpeded by national boundaries. On the ground, however, as crypto has become a more significant player in the financial system, nations have begun to consider issues of sovereignty and regulation. While many countries have so far remained open to crypto, others have restricted its use or outright banned it. The same reason that some have advocated for crypto and blockchain technology \u2014 as a means of revolutionizing the international financial system \u2014 has alarmed plenty of world leaders.<\/p>\n
For example, Hillary Clinton, calling attention to the risks of crypto and the need for regulation, said<\/a> at a Bloomberg conference in Singapore in 2021, \u201cOne more area that I hope nation-states start paying greater attention to is the rise of cryptocurrency because [it] has the potential for undermining currencies, for undermining the role of the dollar as the reserve currency, for destabilizing nations, perhaps starting with small ones but going much larger.\u201d These are strong words, and governments have begun to take claims like these seriously. Despite crypto\u2019s decentralization, regulation appears inevitable and could profoundly alter its development and adoption worldwide. <\/p>\n In general, financial regulations supervise the world of finance, setting up restrictions, requirements, and guidelines for its institutions, with the goal of keeping financial systems stable and establishing and maintaining their integrity. For traditional financial institutions across the world, these rules have been evolving for decades. The cryptocurrency market, as a comparably new area of finance, does not have this larger history, and given its rapid growth and maturity, it now faces the prospect of regulation.<\/p>\n As the crypto market has grown, governments and international organizations, such as the International Monetary Fund<\/a>, have taken notice of its potential to disrupt<\/em> the established economic systems \u2014 in both the forward-looking, tech-world sense of the word and the more troublesome sense of creating problems, such as those associated with the collapse of the crypto exchange FTX in November 2022. In other words, the cryptocurrency industry is now extensive enough that financial analysts worry that it may have adverse macroeconomic consequences if not properly regulated, even if it also has potentially positive effects. The increased risk has led to a call for more regulation. The World Economic Forum, for instance, has said\u00a0regarding cryptocurrency regulation that \u2014 as with other financial regulations \u2014 the aim is to \u201csupport financial stability, transparency, protection for consumers and investors, and a level playing field for different market participants.\u201d<\/p>\n Related: <\/em><\/strong>Gary Gensler\u2019s SEC is playing a game, but not the one you think<\/em><\/strong><\/a><\/p>\n So far, most regulatory activity in this space has been on a national level. But cryptocurrency use is not restricted, or meant to be restricted, to national borders, making international regulatory cooperation something of an ideal \u2014 and one whose realization still seems far off. But regulatory agencies have reason to pursue it: As of this writing, one in five Americans claims to have already been involved in cryptocurrency trading<\/a> on some level. In Singapore, those numbers are even higher. And as the market grows, everyone will be eager to avoid a repeat of the 2008 financial meltdown. In general, the larger the market, the more likely it is to be regulated; this is based on the assumption that as the market grows, it is more likely to affect the common good.<\/p>\n On the other hand, crypto advocates point to the possibility that crypto itself is attempting to avoid a 2008-style meltdown by its very nature. It constitutes an alternate financial structure not dominated by major financial institutions that more urgently need to be checked by regulations. There is a definite tension between crypto\u2019s underlying independent ethos and the nature of regulation. Will this be a creative tension or a destructive one? It may be too early even to speculate, but whatever the case, governments have begun to assert their authority.<\/p>\n The history of cryptocurrency regulation in the United States reflects that of most Western nations. Early on, the U.S. government\u2019s perspective was that Bitcoin (BTC<\/a>) and other cryptocurrencies were fascinating innovations but required little attention from federal agencies. This frictionless system may have exhilarated early adopters, but the more skeptical felt crypto was doomed to failure. <\/p>\n However, to many people\u2019s surprise, crypto not only didn\u2019t go away but continued to grow in both value and popularity. Still, U.S. regulatory agencies such as the Securities and Exchange Commission, whose function is to supervise markets and protect investors, held on to a wait-and-see attitude for some time. Eventually, the crypto market became too prominent to ignore: Problems with initial coin offerings prompted their regulation in 2017. Additional regulation seems inevitable, for instance, in the wake of the collapse of Sam Bankman-Fried\u2019s FTX in November 2022. The question, then, becomes which regulations will be put in place, and what areas they\u2019ll address.<\/p>\nThe regulatory environment<\/h2>\n
Regulating cryptocurrency in the U.S.<\/h3>\n