Virtual assets like Bitcoin are pseudonymous. They lack built-in protocols for automatically capturing their identities in the real world behind alphanumeric strings that comprise a public address. Initially, this property attracted many libertarian-minded cryptocurrency users to Bitcoin. However, some people see it as a weakness that could hamper Bitcoin’s mass adoption.
Decentralisation is another factor that initially drove people into mining and purchasing this digital currency. People say Bitcoin is decentralised because no single authority, person, or entity can regulate this virtual currency. For this reason, Bitcoin enthusiasts believe that it will eventually take financial power from big banks and take it to the masses. Therefore, regulating Bitcoin’s market implies the opposite. Thus, most Bitcoin enthusiasts think regulation might kill the crypto industry. Here’s why controls could benefit the Bitcoin market.
Regulation Could Create Ownership for Binary Virtual Assets
Proper regulations could divide virtual assets into unregulated and regulated categories. That way, they can try virtual assets to their real-world owners by passing through compliances. Consequently, more people will consider the crypto industry legit. Regulators and exchanges can isolate and unrelated cryptocurrencies from regulated tokens. Thus, a platform like the Brexit Millionaire will quickly draw more customers because people will associate it with a regulated and genuine cryptocurrency. What’s more, identifying virtual currencies that people associate with terrorism funding, money laundering, and other offenses will be easier. Stakeholders can also use the regulations to trace crypto origins and verify their real-world owners.
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Regulations Could Give Financial Institutions Investment Green Light
Most financial institutions are slow in their technical innovations. Today, most of them have bureaucracies, outdated systems, and cross-border financial restrictions. What’s more, these institutions lack the economic impetus to alter their current status.
Regulating cryptocurrencies like Bitcoin will bring competition into the financial sector. And this will prompt financial institutions like banks to innovate or incorporate virtual currencies in their eco-systems.
Blockchain-based companies are doing an excellent job in tracking illicit funds movements. However, financial institutions can’t create and operate relevant financial instruments if they don’t know the legality and origins of virtual currencies.
Regulating the Bitcoin market will bring stability and maturity into the crypto sector by ensuring that crypto users adhere to compliance rules. And this will raise individual and institutional investors’ appeal because they will start seeing Bitcoin as a legit long-term investment rather than a speculative, short-term opportunity.
Regulation May Introduce Accurate Valuations
Most people are excited about the high Bitcoin price. However, this is not necessarily something good. A cataclysmic value retrace followed the parabolic climb of Bitcoin in 2017, leading to massive losses for some investors because of market manipulation and over-valuation.
Bitcoin market regulations can identify real-world entities participating in illicit behaviours like over-valuation of the cryptocurrencies. And this can provide a level playing field for institutional and individual investors. People will have difficulty getting away with allusions to create pump and dump action and fake purchase and sell orders.
Properly implemented regulations will ensure that people judge cryptocurrencies depending on their markets or demand and supply forces. That way, more significant investors will provide liquidity by creating stability, and this will reduce volatility by having a knock-on effect, thereby providing dependable long-term value predictability.
Bitcoin market regulations can transform this cryptocurrency from a speculative asset to something usable. That’s because they will enable Bitcoin users to understand the parameters within which to operate. That way, people will move cryptocurrency projects from pilot programs to large business solutions to solve current and future problems since people will embrace Bitcoin without fearing backlash from financial regulators. Until this happens, existing regulations will continue to limit Bitcoin’s use and adoption because it remains theoretical to most people.