3 Reasons Why Cryptocurrency Must Be Regulated

Since time immemorial, there's been a lot of evolution taking place in the monetary sector. Money derives its value by virtue of the purpose it's expected to accomplish. This idea has been used to advance the system over the years. What might have started as barter trade is now comprised of notes and coins. There’s also been another new type of currency that's rapidly growing in popularity. You must’ve already heard of cryptocurrency and its advantages in the current economy.

Crypto is a type of digital currency whose operation is slightly different from other monetary systems. For one, it’s not controlled by a central bank or any central authority. As such, there're a lot of risks involved in the process. Read on to find out more about this and other reasons why cryptocurrency should be regulated.

1. Eliminates Fears And Doubts

Trading cryptocurrencies is one of the most profitable ventures, especially if you’re exchanging the digital assets via reputable channels, as listed by Coinformant. This is, perhaps, one of its main advantages, and one the reasons why it’s attracted many trading enthusiasts. Another factor that makes cryptocurrency more futuristic is its security. It uses the blockchain technology to ensure that hackers don’t tamper with the information.

So, what’s blockchain technology? It can be defined as a system that contains a series of blocks designed to record data in the form of hash functions. What makes it nearly impractical to bypass is the fact that this data is recorded with timestamps and every user is alerted whenever changes occur. As such, the overall security of this system can be termed as decentralized since all users are involved.

The drawback, however, is the fact that not many people are familiar with a decentralized form of security. For this reason alone, there are, still, so many skeptical minds despite the measures put in place. Also, a few cases of digital money theft that have happened in recent years don’t help the situation. Of course, no technology is perfect in its operation. That said, most of these fears stem from a lack of understanding on how blockchain security works.

Therefore, regulating the cryptocurrency will ease these fears by stabilizing values, which seems to be one of the main issues in relation to security. A regulatory body will also take up the responsibility of educating people on the whole idea of digital money. Consequently, its usage will spread widely, leading to more acceptance and increased popularity.

2. Mitigates Tax-Related Uncertainties

Over the years, cryptocurrencies have been regarded as assets rather than currencies. As such, the taxation policies applied to them are somewhat similar to those used for properties. Israeli regulators, for instance, have constantly advocated for a change in the taxation system. The idea is that digital money should be taxed just like any other currency. Therefore, any capital gain or loss must be reported, which doesn’t augur well with the prospective investors.

The best way to deal with this issue is by creating a central body tasked with setting the rules that will eventually lead to better taxation policies. Of course, it won’t happen overnight, but with the right strategies, regulations will definitely enhance the development of the crypto industry.

3. Stabilizes Value

As earlier stated, lack of common regulations in the crypto industry has led to value instability. This is mainly due to the fact that there are a lot of hackers trying to bridge the blockchain security. In addition, scammers are constantly trying to take advantage of new crypto investors. So, how would regulations enhance value stabilization?

It Will Prevent Misuse

Inasmuch as cryptocurrencies have a plethora of advantages, its shortcomings can’t be ignored as well. Since they use blockchain technology, these currencies are untraceable. As a result, these become a popular channel for money laundering every year.

Cryptocurrency mixing services are often used to conceal any evidence leading to the original source. Monero, for instance, prides itself on its privacy-centric blockchain system. However, this unique feature makes it a lot easier to obscure the trail to the sender without any need for a mixing service.

This is one of the many ways through which cryptocurrency is misused by criminals for their illegal activities. It makes it quite an unclean technology, hence, the reason why many people are still skeptical about investing their money in it. Having a regulatory body in place would reduce or even get rid of such activities.

Clarity Of The Rules

As at now, there are no common regulations governing the use of cryptocurrency across the globe. Every region has a set of unique rules, which makes it a lot difficult to go beyond certain boarders. Many start-up ventures are quite uncertain of what future regulations will bring to the industry, not to mention the fact that the current rules are quite outdated and don’t support new innovations.

Coming up with a set of general requirements to regulate cryptocurrency will make it a more attractive field for new investors. Keep in mind that these startups fear being banned by future regulatory bodies for not meeting the requirements. As such, they choose to sit back and wait rather than investing in a rather uncertain venture.

Increased Credibility

An industry’s credibility is one of the main factors that dictate the number of users willing to get involved with the market. At the moment, it’s quite unconvincing for many people due to lack of enough regulations and a central body. Getting rid of such doubts will lead to more trust from the users and an increased rate of usability. Consequently, the value of the currency will gradually increase over time.

Conclusion

As you can see, cryptocurrency is still faced with a lot of problems, from value instability and taxation to credibility issues. The currency is becoming quite widely used, but that doesn’t cover these shortcomings. A regulatory system will definitely bring the best of cryptocurrency by promoting fair taxation and creating a favorable environment for new innovations. At the end of the day, you’ll not only have satisfied users, but also an ever-advancing industry that keeps on attracting new investors.