{"id":212,"date":"2021-03-25T08:15:32","date_gmt":"2021-03-25T08:15:32","guid":{"rendered":"https:\/\/digitalcoinprice.com\/blog\/?p=212"},"modified":"2023-03-28T10:41:38","modified_gmt":"2023-03-28T10:41:38","slug":"regulations-and-their-influence-on-cryptocurrency-development","status":"publish","type":"post","link":"https:\/\/digitalcoinprice.com\/blog\/regulations-and-their-influence-on-cryptocurrency-development","title":{"rendered":"Regulations and Their Influence on Cryptocurrency Development"},"content":{"rendered":"

Regulations and Their Influence on Cryptocurrency Development – Traditional financial instruments have been widely used by people from all walks of life. The latest research shows that more than 47% of Americans invest in bonds. Meanwhile, only 2% of them invest in cryptocurrencies, albeit with its vast mass media coverage.\u00a0<\/span><\/p>\n

Cryptocurrencies are extremely volatile, unlike all the other assets known to investors. And regulators across the world still haven\u2019t come to the same level of adoption of crypto. The laws of different countries are so different that they even call this asset various names. For instance, In Canada and China, it is a virtual commodity. In Australia and Argentina – digital currency, in Mexico – virtual assets, in Italy – cyber currency, in Switzerland – payment tokens, and so on.<\/span><\/p>\n

For sure the lack or the presence of regulations influences the cryptocurrency markets<\/a> from a short-term perspective. Meaning, they trigger price swings. However, from a longer perspective, regulations might play a crucial role in the development of crypto. At the end of the day, official institutions eventually decide how these assets should be taxed and whether or not they should be banned in certain jurisdictions. Let\u2019s see what effect regulations might have on cryptocurrencies in the long run.<\/span><\/p>\n

Safeguard against fraud & crime<\/h3>\n

Thorough compliance with AML and KYC standards by entities that support cryptocurrency transactions ensures protection from all kinds of digital crime. As a rule, organizations like cryptocurrency exchanges, digital wallets, and trading platforms have to adopt the security policies issued by regulatory bodies. By doing so, these financial organizations become safeguards of their users in terms of any fraudulent activities.\u00a0<\/span><\/p>\n

And because digital assets are still a technological novelty, they imply room for different shady activities of which most people are simply not aware. That\u2019s why it\u2019s important to have regulatory procedures to make sure that criminals are not trying to transfer monetary values through online transactions using cryptocurrencies. At first, it might seem that money laundering is a thing from Hollywood movies and it doesn\u2019t concern you if you are a normal individual in society. However, we all can fall victim to such illegal activities because by uncontrolled illegitimate transactions, people may finance some crimes that we surely want to avoid. Regulations can help tackle such problematic activities. And although you as a regular user will have to pass the verification procedures as well, next time when you will want to <\/span>buy Ripple (XRP) with a debit card on CEX.IO<\/span>, you may rest assured that your funds are safe.<\/span><\/p>\n

Greenlight to investors<\/h4>\n

While governments of some countries do not make cryptocurrencies completely legitimate, they do create a positive regulatory environment for attracting investments into their region. One such country is Belarus. Their president Alexander Lukashenko has signed a special <\/span>decree<\/span> that made crypto tax-free and allowed ICOs as well as crypto transactions.\u00a0<\/span><\/p>\n

These conditions are supportive of the development of the new digital economy. However, regulators still watch carefully after suspicious activities in regard to digital transactions. Any country can impose sanctions on another country or just one financial institution of another country if they don\u2019t like their transactions and those seem like money laundering. For example, if all of the banks of Nigeria seem fine yet one of them has suddenly started transferring large amounts of money, another country may ban the transactions of this single bank only if they suspect that they are trying to legalize illicit funds which may harm the economy, stability, and safety of the country.<\/span><\/p>\n

So back to investors, when they see a lucrative opportunity for business, they want to make sure that as soon as they invest a large amount of money in the venture, their business will be safe, too. They don\u2019t want the war to be started the next day in this country and vanish all the opportunities. Same way, if they invest in crypto, they want to make sure that the regulatory approach is positive towards this kind of asset and it won\u2019t change overnight.<\/span><\/p>\n

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Establish the asset class status<\/h4>\n

The seemingly crazy price swings of the first cryptocurrency bitcoin indeed show a repetitive pattern, research shows. So it appears that in actuality, bitcoin is more stable and predictable than the quote fiat currencies like the US dollar. This fact may lead to opportunities like bitcoin being a safe-haven investment both for individuals and institutions as well.\u00a0<\/span><\/p>\n

At times of economic instability caused by the global pandemic and severe inflation of traditional currencies, people from all backgrounds will tend to <\/span>secure<\/span> their hard cash in the digital equivalent that has little to no chance of inflation like bitcoin. The latter cryptocurrency possesses such characteristics as scarcity and high demand which makes it a potentially good store of value. As a result, bitcoin has a chance to become a new asset class that the worldwide economy has never seen before.\u00a0<\/span><\/p>\n

At the end of the day, millions of investors are trading stocks and bonds which are viewed as established asset classes. However, they also have a questionable underlying value. In this case, bitcoin becomes an even harder kind of asset because of its software features of an immutable blockchain ledger that cannot be just lost or seized by somebody since it\u2019s distributed across multiple computers. Regulatory approval is the only thing that bitcoin lacks to officially become a financial asset class.<\/span><\/p>\n

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Stability and accurate valuation<\/h4>\n

The cryptocurrency market has been a target for many speculative investments. Perhaps this is one of the reasons why this market suffers such drastic price rallies. The large number of novice investors who don\u2019t have a professional trading strategy also affects market dynamics. So if we imagine for a moment that most popular crypto coins have become completely legal, what would happen?<\/span><\/p>\n

The probable answer is that these markets wouldn\u2019t be driven as much by fear and greed anymore. This, in turn, would make for increased stability in prices and a more accurate valuation of digital assets. Clear regulations would also make for a consistent flow of liquidity. Because if the investors are not sure about the taxation or the probable ban on cryptocurrencies, they prefer to either steer clear or buy and hold. Consequently, markets go in a bearish trend. And if the legal status of crypto would become clear, this would drive even wider adoption and usage of such assets on a daily basis.<\/span><\/p>\n

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Regulations and Their Influence on Cryptocurrency Development – Traditional financial instruments have been widely used by people from all walks of life. The latest research shows that more than 47% of Americans invest in bonds. Meanwhile, only 2% of them invest in cryptocurrencies, albeit with its vast mass media coverage.\u00a0 Cryptocurrencies are extremely volatile, unlike […]<\/p>\n","protected":false},"author":3,"featured_media":213,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-212","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-guide"],"_links":{"self":[{"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/posts\/212","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/comments?post=212"}],"version-history":[{"count":6,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/posts\/212\/revisions"}],"predecessor-version":[{"id":2287,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/posts\/212\/revisions\/2287"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/media\/213"}],"wp:attachment":[{"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/media?parent=212"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/categories?post=212"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/digitalcoinprice.com\/blog\/wp-json\/wp\/v2\/tags?post=212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}