The Reality Of Cryptocurrency Regulation And Where We Ought To Be

Many have speculated that the cryptocurrency industry can incur macroeconomic consequences if regulations are not put in place to curb the issues of investment insecurity and other threats.

Cryptocurrency investors – especially those who use trading bots like eToro – are also very concerned about how new regulations would affect their investment portfolios. Cryptocurrency regulations must not only be effective but also have a global coordinated framework.

The Current State Of Cryptocurrency Regulation

At the start of the month of March, reports came in that the United State’s President – Joe Biden – had signed off on the much anticipated Executive Order on Ensuring Responsible Development of Digital Assets. This order commits the Federal government to take part in research on cryptocurrency and to make sure that other departments across the government sector align with the creation of the regulatory framework for all digital assets.

The order also outlines a series of guidelines for government approaches to address the risk and cultivate the potential benefits of digital assets and the blockchain technology that they stem from.

A member of the World Economic Forum’s Digital Currency Governance Consortium, Jeremy Allaire stated in an interview that the exploration of the crypto sector by the government will tackle security, financial inclusion, privacy, global competitiveness for the United States Dollars, and a lot more.

Furthermore, the White House is all geared up and ready to make a deliberate effort toward regulating the digital asset industry. However, a real change cannot come soon enough given the size and expected growth of the industry. Here’s the reality:

Currently, there are over 18,142 cryptocurrencies, 460 cryptocurrency exchange platforms and the global market capitalization of cryptocurrency amounts to a heavy sum of about $1.5 trillion. The industry is so big that every hour about $91 billion worth of cryptocurrencies is traded – with the majority being Bitcoin and Ethereum.

Given these jaw-dropping statistics and the regulatory push regarding the cryptocurrency industry, it is expedient that the government begins to take stock of the present conditions of cryptocurrency regulations. Doing this will vehemently drive home the fact that a more coordinated global approach to cryptocurrency regulation is necessary.

The Imperativeness Of Cryptocurrency Regulations

As the traditional financial system gradually makes way for the crypto ecosystem, the growing levels of the interconnectivity of both financial systems, are raising a lot of concerns regarding spillover effects that could threaten systemic stability.

For quite a while now, cryptocurrency has been seen as a tool for a more diversified and decentralized economy. But sadly, things are beginning to read differently.

Consequently, earlier this year, the International Monetary Fund published data that indicated a direct correlation between Bitcoin and the S&P 500. This has now led to further agitations by investors regarding the stock markets and cryptocurrencies.

What’s The Way Forward?

We must acknowledge that the United State’s Executive Order is one crucial step in the right direction toward enabling cross-agency collaboration.

The need for a globally coordinated approach, encompassing all international corporations around regulation for cryptocurrencies will be economically ideal, protect consumers, and prevent abuse of Digital assets on a larger scale. 

The Digital Currency Governance Consortium of the Forum – which is made up of a total of about 80 organizations representing various sectors -is working towards this goal of global coordination of cryptocurrency regulation. 

The Consortium has focused its second phase of operations on examining the macroeconomic impact of Digital currencies on other stable coins and Central Bank issued currencies.