One of the most attractive features of cryptocurrencies is their lack of regulation. Blockchain has not just become the build and framework that enables cryptocurrencies to exist. Yet, Blockchain has also become the regulatory framework in spirit as there is no real organization or playbook that fulfills this role.
Although some continue to rely on the tech behind the enablement of cryptocurrencies, some have also dared to question whether it’s time to regulate this type of currency. Whether users are purchasing for their top sports news or looking to place their next wager, cryptocurrencies are now under the watch of bigger organizations.
High Volatility as a Driving Argument
Most currencies are regulated by central banks in each specific country of origin. Central banks regulate currencies by applying specific policies, and economic regulations while taking in various economic factors that come into play.
One of the main reasons central banks apply this level of analysis and control to their currencies is to keep them valuable. And by valuable, this implies that all currencies must hold a specific value in the country of origin and compared to other currencies around the world. This is basic macroeconomic functioning.
So, one of the questions still roaming the financial world is why cryptocurrencies still have no regulatory body behind them. Suppose the main argument behind regulating currencies is to avoid all types of high volatility. In that case, the existence of a type of popular currency defeats the entire purpose behind examples that exist all around the world.
High volatility occurs when different market forces act on currencies to either increase or decrease in value. For instance, specific investments from very influential business moguls will estimate the value of currencies. Take the example of Elon Musk’s billion-dollar investment in cryptocurrencies,
Overnight, certain currencies like Bitcoin can either augment or decrease anywhere from 10% to 20% or even 25% in value. So naturally, this would turn into turmoil in any country that held cryptocurrencies as the main coin. Yet, that is perhaps one of the reasons why regulation is still inexistent in this digital grid.
The Challenges of Regulation
To experts, cryptocurrencies are simply too new in any major country’s financial scheme or grid. So starting with understanding what cryptocurrencies are is probably a positive step. But, unfortunately, although it sounds obvious and perhaps even simple, it’s quite the opposite.
Most experts have taken their time to study the nature and the build-up of cryptocurrencies, and it’s still not a topic that most can consider themselves an expert on. But, on the other hand, there is no real organization, national or international, being created or crafted to take hold of cryptocurrencies.
All currencies are valid in at least one country of origin. That means folks can travel worldwide, yet that specific currency will only hold its value in one particular country, while cryptocurrencies work differently.
These are not dependent on geographical boundaries as there is no regulation coming from anywhere. Sure, some countries and businesses will permit a higher degree of the transaction, such as BSV Blockchain specializes in adding blockchain solutions for businesses and governments. Still, that doesn’t specifically mean that these countries are beginning to regulate these forms of payments.
Organizations Need to Step Up
The challenge is up to an organization that will be able to undertake the challenge of building a regulatory framework. But, then, that regulatory framework will need to be applied from a global perspective.
This regulation move might also be perceived positively or quite negatively. On one side, with regulation being promoted for cryptocurrencies, more investors could flood the market. This, however, could go either way as overly regulating a new form of exchange which has proven successful, could drive many out of the market.
The dilemma will remain. However, experts predict that proposals to regulate cryptocurrencies are already being drafted and perhaps revised. The near future could bring the restructuring of one of the most influential currency types in the last decades.