One of the decentralized platforms in the financial aspect is the crypto market. This global finance market is popularized for its non-control, decentralized, profitable investment and trading. But in this advanced era, it became riskier to fully believe in this marketing platform. So the regulation is mandatory to get a healthy crypto market all over the world. For the lack of regulation, this global digital asset exchange platform became a territory of hackers, fraudsters, and smugglers. A massive portion of the listed country has its economy from this crypto market cap. So, lack of regulation creates a huge space in protection and that leads a country to a huge financial loss. To prevent these unethical practices, the US is getting the approaches to have a regulation on this crypto market.
Overview Of The Crypto Regulation :
The release of the markets in crypto assets, provisional agreement with the EU, and release of the framework for international engagement on digital assets in the US indicate that regulation is going to control and protect the market.
The World Economic Forum’s Digital Currency Governance Consortium (DCGC) has researched and analyzed the macroeconomic impacts of crypto and fiat-stablecoins. This analysis found that a massive amount of financial commodities is backed by the global crypto market. By this time, this amount is gradually loosening the value of the trading scams, and fraud in the market. Which leads the market users to leave the platform and reduce the market cap.
This analysis aimed to support financial stability, transparency, and protection along with users’ beliefs.
Why Should Regulation Be In Force?
By the end of June 2022, the Council of President and the European Parliament have participated in the agreement on unbacked crypto assets, stablecoins, trading venues, and holding wallets.
It has exposed that numerous cryptos are unbacked and several wallets are anonymous. Even in trading, there are so many investors whose identity is unverified. The number of users’ money losses is uncountable.
Apart from this, in November 2021, the crypto market cap was at its peak point of $3 trillion. But by the last period and start of the new year 2022, the crypto market has been facing a tragic turning point. Since the last of 2021, Bitcoin has lost its value by over 70%. This top crypto’s value loss affects the other cryptos negatively. As a result, the $3 trillion market cap falls to $1 trillion by the new year of 2022.
Additionally, the fraudulent activity caused the price of stablecoin TerraUSD (UST). As an effect, the sisters’ coins such as LUNA, and BTC lost their value rapidly.
Even the lack of regulation unsucceeded Ethereum’s coin DAO. This coin failed to exist in the market. For the hacking in 2016, Ethereum lost $60 million Ethereum coins by a massive theft. Though the currencies were returned, the impact on the users was not curable. After this robbery, this blockchain was divided into two platforms named Ethereum and Ethereum Classic.
Aims Of The Regulation :
The initial step of regulating the crypto market has been taken. This year, US president, Joe Biden has discussed the regulation of the crypto market.
This regulation or controller will be engaged to preserve financial stability and users’ protection. It would keep the eye on every exchange and trading neutrally. The regulation would consist of various guidelines and rules. Though this has not been cleared to the users yet.
Who Will Regulate?
Sen. Cynthia Lummis, R-Wyo, and Sen Kristen Gillibrand have proposed a bipartisan Responsible Financial Innovation Act for the authority. The proposal has been referred to the Senate Committee on Finance. It is reported that the proposal has pleaded to give the primary regulatory authority to CFTC.
Predicted Impacts For The Regulation :
There are several predictions among the experts regarding the upcoming regulation impact on the crypto market.
It is expected to maximize the crypto market cap through fair regulation. If a healthy control will stand against unethical practices, investors would get reliability from this global marketplace. This will lead to generating more authentic users that will grow the market value in the future. Also, the volatility of cryptocurrencies will be diminished due to the regulation and help stabilize high prices.