Looking Ahead: What Should EU Regulations for Cryptocurrency Sector Look Like?
There is always a choice. The cryptocurrency industry has been built by the community of freedom-loving, tech-savvy people who wanted to make a tremendous impact on payments since the inception of the banking system. And they nailed it. Blockchain implementation made it possible to initiate advancements even beyond traditional finance, and many global companies benefit from it for their operations.
After the decade of development, filled with hopes, despair, and the emergence of new directions, the world has been divided into two camps. One always struggled for freedom while another party was high on appreciation of what has become known to some as a watchdog regime.
How can one acquire the most precise and truthful evaluation? Let’s analyze the pros and cons of regulations to realize the whole picture.
The Binary World
Back in the times immemorial, when Bitcoin was some questionable joke alike invention, people used by thousands to buy a few slices of pizza or even purchase a used car, no one thought it might ever grow in a trillion-worth industry.
Well, things are different now. Early adopters became billionaires, later ones – millionaires, and even casual investors enjoyed skyrocketing returns on investments as even stimulus checks from 2020 made some people rich. And we know well – where’s the money, there’s a fraud and a set of laws to protect people from it.
Last month, when BTC hit its new record, Coinbase CEO Brian Armstrong told CNBC that the regulation is one of the biggest threats to crypto. The chief executive of Coinbase explained that with the advent of the Internet, many countries also feared its development and tried to control the flow of information. China has gone very far in this regard, still trying to supervise the Internet to the best of its ability.
In fact, cryptocurrencies have spawned a new industry direction in the financial markets. Back in 2017, the capitalization of the global securities market peaked at $ 40 trillion. Thanks to the advent of computers and the Internet, capitalization in this area has increased significantly over 15 years, showing 10x growth!
The rising star of Bitcoin helped to popularize these assets among a wide audience. Among the first cryptocurrency exchanges was the Kraken exchange, founded in 2011 in San Francisco. Earlier in 2011, Mt. Gox (Mount Gox), a giant player of that time, began to operate with a share close to half of the volume of transactions in the Bitcoin network. Cryptocurrency exchanges differ in their principles from stock exchanges, but they have the same essence – providing services for trading assets.
Today, the stock exchanges are superior to cryptocurrency platforms when it comes to insurance of investor accounts and brokerage companies. However, when compared to the stock market and forex, cryptocurrency exchanges have an undeniable advantage in the form of access to data, high volatility, and easy accessibility to trading. However, since such exchanges are not regulated in any way when making a deposit, there is a risk of its complete loss!
Companies registered in the European Union or the United States provide insurance of customer deposits for tens of thousands of dollars in the event of bankruptcy of the organization and other unforeseen circumstances. Therefore, the state, not the company, is responsible for the safety of funds. Cryptocurrency exchanges cannot offer this so far. Hacker attacks, unscrupulous employees, and rug pulls are problems that have arisen before, and the risk still remains at large.
The examples of downfall are countless when it comes to funding losses in the crypto field. Mount Gox and Quadriga CX are just the tips of this iceberg of fallen investor’s expectations. At the same time, in the absence of regulation, becoming a client of such an exchange is possible simply by having only an email. To trade in the stock market or forex, one will be required to confirm his identity and place of residence by providing several documents. Naturally, government regulators must comply with such procedures, which to some extent creates an inconvenience. The profession of a trader is full of risks that a trader tries to minimize losses if trading is his main source of income. Therefore, it is unlikely that investors will actively invest in a new area before providing guarantees.
Volatility is still on the side of cryptocurrencies. Every day, new coins show up on the market and experience a level of growth that did not exist at all in the stock market or forex. The token market has weak liquidity compared to the stock market and forex, where capitalization is measured in trillions of dollars, which is ten times higher than the capitalization of cryptocurrencies. Therefore, as long as there is no such regulation in this market, liquidity, accordingly, will be at a low level, which will allow the price to make sharp jumps.
Staying on the side of right
The cryptocurrency sector is booming globally, but acceptance and regulation are different in the parts of the world. Why is it crucial for the EU to have the regulation for crypto on the supranational level?
There is no denying that European Union is very strict and conservative to innovations. Some views, such as expressed by the head of the Eurobank Christine Lagarde, mentioning that ECB won’t issue Digital Euro in less than five years, prove that the state is lagging in cryptocurrency adoption.
On the other hand, fraudsters have fewer chances for their illicit schemes to operate and fool the clients. By shaping new AMLD frameworks every few years, the EU watchdogs aim to make the continent the safest harbor for digital asset clients.
One of the most successful players in the EU league is currently STEX, a fully compliant spot crypto exchange supporting all European AML standards. This platform offers convenient solutions and extensive trading pairs to provide an unmatched trading experience. STEX is currently supporting more than 400 different cryptocurrencies and users can buy digital assets using Visa and MasterCard and SEPA, Bancontact iDEAL payment systems. The platform operates under the license of the Estonian regulator and complies with KYC / AML procedures.
“The world has seen way too many examples of extremely devastating activity on unregulated platforms. Emerging industry required regulation in order to mature and attract more clients: mainstream user along with financial heavyweights will be more eager to step in knowing that their funds and privacy is better protected ”, – the CEO and platforms founder Vadym Kurylovych stated commenting on the development of legal frameworks in the EU.
VK also warns that due to the fact that many exchanges are not regulated in any way when making a deposit, there is a risk of its complete loss, while there is no insurance.
The last examples of the crypto world hurdles perfectly show that there is less room for cybercriminals in the modern world. The importance of regulations will grow since this activity is aimed to shelter clients from various growing cases of fraud. Everybody wants safety when it comes to the critical point and there’s only one way to achieve that. No matter what, the industry’s fines have already chosen their way, and no other variants will appear over time. Do your best for yourself and make the right choice. Stay on the side of light.