How do Regulations Affect Cryptocurrency Values
Regulation is something that limit freedom. Whilst it is true in essence, regulations are also here to protect us by reducing risks, helping the adoption of cryptocurrencies and ultimately with a higher degree of certainty and protection, also driving the values of cryptocurrencies up.
In 2020 we have seen multiple new regulations imposed by independent regulators all over the world, read on to understand the interactions between regulations and crypto prices.
How do regulators affect crypto values?
In general, when it comes to cryptocurrencies, the regulators tend to treat crypto the following ways:
- Treat crypto like its fiat money. When this is the case, we can see there will be more limitations with the transfers or exchange of cryptos and also the anonymity nature of cryptocurrencies will be limited.
- Regulating specific cryptocurrencies. For example in some jurisdictions, regulators make the difference between utility and security tokens and only regulate the security part of it. This would obviously affect the prices of cryptos.
- Imposing laws to limit or control ownership. This has happened and in some cases causing the value of the specific crypto to decrease.
Given the decentralized and highly technical nature of crypto, it was referred to as the Gold Rush or the Wild West before. In fact it was true back in the days when there were virtually no regulations all over the world since Bitcoin was so new and relatively inexpensive. With the growing Bitcoin price came the regulations
In fact, a lot of people think the crypto regulations were imposed to control the value of crypto since sometimes regulations can stunt growth. Regardless of directions, the price changes created by these announcements of regulations especially in the crypto heavy jurisdictions are big enough for investors to profit in these swings.
For example, when South Korea announced that their regulator was formally considering a ban or at least heavily controlling the crypto market in South Korea, the values of most cryptocurrencies fell since South Korea was and still remains a popular crypto jurisdiction. Take Bitcoin for example, its value dropped over 15% after the information was released to the public within hours.
How do regulations help crypto?
By now, it is clear that regulations can create movements but we are not always clear which way the price goes. In a lot of people minds, regulations and decentralisation are still two different extremes and should not be seen together. However, it is in our opinion that regulations actually help crypto in the long run.
In a world without regulations, it is inevitable that there will be more victims than if there are regulations. However, it is even worse to have regulatory uncertainty which is a phase we are going through as a global community of crypto participants. In some places in the world, investors don’t even know if their gains are taxable or even if it is legal to buy or sell crypto. It is certainly better in our minds if the regulators can say for certain what’s allowed and what’s banned. Regulatory certainty is something that can help the crypto industry as a whole and can tremendously promote the adoption of cryptocurrencies.
More regulated uses of crypto
With the lack of regulations, the usage of cryptos are limited since most financial activities have the be licensed. Take credit cards as an example, it would be an illegal device if it is not regulated. So for us to see more innovations in the crypto space and see more real life uses of crypto, the regulators will have to make up their minds regarding their regulations on crypto.
Without it, businesses cannot start adopting crypto and innovate.
Regulations are meant to provide protections to everyone including the object of regulations. With clear regulatory guidelines we will see exchanges becoming more and more secure and the market will start digesting the bad ones. What we will be left with would be a safer and more secure crypto space.
Disclaimer: The content herein is not, and is not intended to be, legal, financial, investment, or other advice.
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Bitprive is a Blockchain startup focusing on developing a regulated global cryptocurrency OTC marketplace with 180+ popular payment methods in the world.
Verified users can list buy and sell offers on the Bitprive platform for multi-cryptocurrency trading with a wide range of digital and physical payment methods. On top of providing the platform technology and matching services, we also provide the BitEscrow Network where crypto is held in our Bitprive hot wallet before the payment is confirmed. Once the seller confirms payment, Bitprive releases the crypto from the BitEscrow Network to the buyer’s Bitprive wallet.
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