Greater regulatory guidance, especially carefully targeted, has the potential to curb speculation in crypto assets. Less speculation can lead to increased investor trust, which may attract more long-term investors who have previously declined due to a highly speculative, volatile crypto market. Cryptocurrency regulation is critical from the perspective of investors. The government can make the cryptocurrency market a safer place for investors by enacting the appropriate laws.
Here are four reasons why cryptocurrency regulation would be beneficial
1. Protect investors by preventing market manipulation: Cryptocurrency market manipulation and price volatility are prevalent. Consider Bitcoin, the world's oldest and most popular cryptocurrency, which reached all-time highs in early 2021 before falling and losing a large portion of its value. As a result of the absence of authorized information on these digital assets, as well as the technical complexity involved with them, it is critical to put rules in place to protect investors.
2. Allow only certain coins: There are thousands of cryptocurrencies available around the world. However, most investors are only familiar with a few of them, like Bitcoin, Ether, Ripple, and Dogecoin, among others. They know very little about the thousands of other virtual assets. To protect customers, a regulatory entity clearing cryptocurrency is required, which may provide all information about the performance, hazards, and potential of digital assets.
3. Risks of online fraud and cyber security: Investing in cryptocurrency entails an additional risk: online fraud. Hacking is a big issue all across the world, and cyber-attacks are becoming more regular. A single cyber-attack could result in losses for investors who have invested in bitcoins. Authorities can put in place restrictions to help cryptocurrency investors protect their assets. In addition, investors can resolve problems or retrieve assets if they lose them.
4. Money laundering: Any unregulated system has the potential to finance illicit activities. As a result, similar to a bank, a customer due diligence process is required. This can aid in tracking down investors' true identities and validating their whereabouts when purchasing or selling cryptocurrency. Any violation of such standards should result in harsh penalties.
We can speculate about the value of cryptocurrencies for investors in the future months and years (and many will), but the reality is that it is still a new and speculative investment with a little history on which to build forecasts. Nobody knows for sure, no matter what an expert thinks or says. That is why it is critical to only invest what you are willing to lose and to stick to more traditional assets for long-term wealth creation.
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