The effects of regulation on cryptocurrency trading
In recent years, the world of cryptocurrency has recorded rapid growth and development. With the advent of decentralized cryptocurrencies such as Bitcoin and Ethereum, many people have exploited the potential for high returns by trading these digital assets. In view of the increasing popularity of cryptocurrency, however, there is a growing concern for regulation. In this article, we will examine the effects of regulation on the trade in cryptocurrencies and examine the current regulatory landscape in various jurisdiction.
Regulatory environment
The regulatory environment around cryptocurrency is complex and continues to develop. In 2017, the cryptocurrency market experienced a significant increase in popularity, with many new investors entering the scene. With increasing market, however, this also grew the concerns about security risks, volatility and illegal activities. The supervisory authorities all over the world reacted to these concerns by introducing regulations to contain the use of cryptocurrencies for illegal purposes.
Types of regulations
There are different types of regulations that influence cryptocurrency trade, including:
- Anti-money laundering (AML) : AML regulations require stock exchanges and other financial institutions to check the identity of their customers and report suspicious transactions to the regulatory authorities.
- You know your customers (KYC) : The KYC regulations require stock exchanges to check the identity of your customers and to store customer data for a certain period of time.
- capital requirements : The investment requirements are intended to prevent banks from awarding too much money for cryptocurrency projects, which can lead to a speculative bladder on the market.
- Securities regulations : Securities regulations regulate the trade in cryptocurrencies as securities, similar to stocks and bonds.
Effects on cryptocurrency trading
The effects of regulation on cryptocurrency trade depend on the specific regulations introduced in every jurisdiction. Some countries have chosen a more relaxed approach, while other stricter regulations introduced the market that had significant effects.
Positive effects
Regulations can also have a positive impact on cryptocurrency trading by ::
- Increase in security
: Provisions such as AML and KYC help to prevent money laundering and other illegal activities.
- Stabilizing markets : Regulations and capital requirements can help stabilize the markets by preventing excessive speculation.
- Improvement of consumer protection : Regulations such as AML and KYC offer consumers more protection against fraud and phishing attacks.
Negative effects
Regulations can also have negative effects on cryptocurrency trading, including:
- Limits for trade : Some regulations limit the ability to act cryptocurrencies, e.g. B. a license or registration for an account.
- Increased costs : Regulations can increase the costs for stock exchanges and other companies that work in regulated markets.
- Restricted availability of services : Regulated services such as deposit wallets can be limited or not available due to strict regulatory requirements.
Variations in responsibility
The regulations related to the trade in cryptocurrencies vary significantly from responsibility to responsibility. Some countries have chosen a more relaxed approach, while other stricter regulations have introduced that can have significant effects on the market.
United States: a mixed bag
The United States were at the head of the regulation in the cryptocurrency room. In 2017, the Coin Act banned the promotion of cryptocurrencies as an investment option, and in 2020 the SEC issued a guide document in which the regulatory attitude towards digital assets was presented.