Crypto regulation is the best thing that can happen for the market

Crypto regulation is coming, no matter what part of the world you operate in. This has been in the cards ever since cryptocurrency and blockchain technology made the leap from a niche dark corner of the Internet to daily headline news. Institutional economic actors such as multinational banks and funds are investing in crypto, and states can be considered the slowest, most powerful economic actors. Although Bitcoin (BTC) and Co. can be seen as a threat to the state, there is a way that both can benefit from each other, and traders don't necessarily need to fear regulation.

In the United States, the House Financial Services Committee, which discussed the broader issue of crypto regulation in December, is turning its attention to stablecoins as a vector for regulation. As of 9 February, the current discussions centre around whether stablecoins should be regulated at the federal or state level. Whichever side the Committee lands on, there is an indication that positive sentiment and wider adoption of digital currencies will emerge. Missouri Representative Blaine Luetkemeyer stated that while many cryptocurrencies could threaten the dominance of the dollar, stablecoins backed by dollars presented a "unique opportunity" for the US fiat currency to remain a global competitor and the world's reserve currency.

The US isn't the only country considering crypto regulations, but as a world power and influencer of global markets, the American attitude is certain to set a pattern for others. China, with its crackdown on mining and advancement of its own CBDC, is building a more restrictive regime. Other countries are attempting to pass laws controlling the creation or use of digital currencies, with wide variation across the world creating uncertainty as well as opportunity.

What about taxes?

With the vast sums of money being made in the crypto space, it was inevitable that states would try to tax these profits. In India, the finance ministry announced the launch of an Indian CBDC later this year or the next, along with a 30% crypto tax. Rising adoption has also inspired Colombia's tax authority to take a tough stance on crypto tax evasion, while in Venezuela, the government is looking to impose a 20% tax on some crypto transactions. While taxes are intended to be used for the benefit of wider society, not all traders will be happy with states taking a cut of their earnings. So, if taxes are the downside, what is the advantage of regulation?

Increased adoption means more opportunities

Crypto's lack of regulation made it attractive to innovators and people on the fringes in its early days, but also to outlaws. That, combined with the conservative nature of financial institutions, slowed its growth and adoption around the world as investors stayed away from this risky asset sector. However, the value of cryptocurrency as a whole tends to be boosted by institutional investor interest, as well as the creation of blockchain solutions that integrate with the mainstream financial system (e.g., XRP, Ethereum-based DeFi projects and CBDCs). If we want to see more blockchain projects that bridge the transition between the old and new money economies, regulation will help build that bridge.

In fact, the crypto community can thrive in an environment of regulation. Take Singapore, for example, which has seen a tenfold increase in crypto-related investments last year worth $1.48 billion, up from $110 million in 2020, despite the central bank cracking down on crypto advertising and business licensing. Rather than being bad for business, regulation can give startups and investors confidence to operate and start new blockchain projects that can become exciting assets for trading.

Less volatility and uncertainty

Market volatility can be an advantage for speculators, but in the long term, more stable investments can yield greater profits. Uncertainty and inconsistent regulation can dramatically upset the crypto market, as was the case with China and Russia's recent crackdowns, with the former's mining ban being a large factor in the crypto market's slump.

Clear, consistent regulation that falls outside of outright bans may be the answer. For example, Kazakhstan, to which many miners migrated after the Chinese ban, has decided not to react with a blanket ban of its own. Instead, it has proposed a tax on mining hardware as well as power price hikes for mining operations. This compromise can help the mining industry find a stable home and avoid major disruptions like the Chinese exodus.

Consumer protections

As crypto has gone mainstream, stories of scams and fraud have abounded. From fake addresses to rug pulls to fake NFTs ripping off artists, the fact that crypto transactions are irreversible, hard to trace and operate in a legal grey area has claimed a lot of victims.

To have consumer protections and recourse, it is necessary to cooperate with the government, and this would mean accepting some regulation. The crypto industry itself recognises this and has formed groups, such as the Cryptocurrency Compliance Cooperative, to work with state authorities to establish industry standards and fight market manipulation.

State authorities are already active in fighting crypto crime. This week, US officials seized some $3.6 billion worth of Bitcoin tied to the 2016 hack of the Bitfinex crypto exchange. If crypto users are to have some protection under the law against bad actors, then crypto itself will have to accept the rule of law.

How to prepare for the next stage of crypto regulation

The smart crypto trader will keep up with international news and research government activity just as they do with market trends. Now is the time to anticipate future regulation by accumulating cryptocurrency before potential state demands become too onerous and predict which coins might have their value boosted by certain countries' support for crypto. For both of these activities, StormGain provides the best tools for crypto trading under all circumstances, including low commission, a free Bitcoin cloud miner and advanced analytics all in one easy-to-use app. Are you ready for the new age of crypto? Then register with StormGain in just a few seconds to maximise your profits!