Cryptocurrency has an enormous global impact influencing not only financial systems and industries but also government policies. Young populations are more excited about cryptocurrency and are amongst the top investors. However, experts are more concern about the risk of investors’ irrational expectations from Cryptocurrency.
This is because the market price of bitcoin fluctuates more frequently and erratically. For instance, a study has shown that around 2018 the price of bitcoin rose to $20,000 however, it quickly came down to $ 7,000. This makes bitcoin investment heavily unpredictable and precarious. This is also the reason cryptocurrency investment entails a lot of risk of financial frauds. As a result, effective governmental regulations are all the more essential to ensure legitimacy and security of investors. The following section discusses some important future trends of cryptocurrency regulation.
Global Cryptocurrency Regulatory Trends
Since, cryptocurrency has emerged as an influential online investment medium, governmental regulation is essential to check the adverse effect of crypto investment. Here are important future trends of cryptocurrency regulation.
1. Increase in Global Regulatory Cooperation
To combat money laundering and prevent financing of terrorism through crypto investments there is a growing effort from of nations across the world to collaborate between governments and financial regulatory boards. Most nations are more inclined to align their regulatory standards with international standards.
Financial Action Task Force (FATF) issued set guidelines on cryptocurrency regulations. Countries are now adopting these regulations to prevent illicit financial transactions. Since, financial fraud cases often involves multiple nations, experts are noticing an increasing collaboration through financial treaties and agreements.
2. Prioritize Consumer Protection
Since, general people are increasingly investing in cryptocurrency they are getting exposed to scams, frauds and market manipulations. Moreover, the price of cryptocurrency is extremely volatile enhancing the chances of serious financial losses. Thus, regulatory bodies would focus more on customers’ safety and security. They are like to come up with consumer protection laws that would be mandatory for cryptocurrency managers to follow.
Moreover, stricter rules would come up on cryptocurrency transactions and platforms. The platforms would be more accountable on their services and policies and would also be liable to compensate for any fraudulent transactions and subsequent losses. The U.S. Securities and Exchange Commission have started monitoring the transactions of cryptocurrencies to protect investors from fauds and losses.
3. Regulatory Evolvement with Technology
As the cryptocurrency technologies are evolving in a fast space the regulatory laws need to be upgraded to keep pace with the changing technologies. The new crypto-technologies include decentralized finance (DeFi), non-fungible tokens (NFTs), and stablecoins are making it increasingly challenging for traditional regulatory bodies to monitor. Especially, regulation of decentralized finance is quite challenging without a centralized body. However, regulatory bodies might come up with laws to ensure accountability from the developers of decentralized platforms.
4. Taxation of Cryptocurrency
Since cryptocurrency igenerates significant earnings, governments will try to tax cryptocurrency transactions. Tax payers of several countries are now required to report their cryptocurrency earning for tax filing. In the future it is predicted Cryptocurrency earners would face stricter tax laws. In the USA, Internal Revenue Service (IRS) has already issued strict guidelines for tax payers to report cryptocurrency transactions and earnings.
5. Role of Central Bank Digital Currencies (CBDCs)
Central Bank Digital Currencies is a government backed digital currencies. Many countries are working on issuing their own digital currencies such as China’s Digital Yuan and the European Union’s Digital Euro. They have initiated their experiment with digital currency and aims to adopt cryptocurrency as a centralized financial system. Centralized cryptocurrency platforms are believed to be more well-regulated and secured.
Conclusion
The blog has discussed some of the future trends of cryptocurrency regulation. Overall, the private cryptocurrency platforms are going to be more accountable as efforts are being already made to regulate decentralized crypto platforms by monitoring developers of those platforms. Additionally, taxpayers would be liable by law to report details of their crypto earnings and centralized government owned cryptocurrency would be more developed.