The prestigious International Monetary Fund (IMF) said earlier in 2022 that there is much work that needs to be done about the enforcement of legislation throughout the crypto industry. In contrast to many national governments, the International Monetary Fund (IMF) has never taken a stance that is directly opposed to cryptocurrencies; however, it has consistently warned about the extreme volatility risks associated with them as well as the lack of protection they provide for end-users. Read more: what is a smart contract? | Multibank
The illustrious institution has stressed the critical need for immediate action in the field of cryptocurrency regulation, stressing the necessity for a framework that would function in both directions. First, the regulatory framework for cryptocurrencies needs to be structured in such a manner that it in no way undermines the outstanding advantages of cryptocurrencies, but rather assists to guarantee that those benefits are fully realized.
On the other hand, the International Monetary Fund (IMF) has also stated that regulations governing cryptocurrencies will adhere to certain protocols. These protocols will mitigate the typical risks associated with cryptocurrencies, serve the best interests of users and innovators, and prevent the dissolution of the monetary policy of central banks.
Also Read: buying cryptos via Multibank here
Global cooperation is necessary
The International Monetary Fund (IMF) has emphasized the need of global cooperation in the regulation of crypto assets. The legal framework for the cryptocurrency markets must include all the industry’s most important facets, such as payments, taxes, derivatives, trading, and more.
The International Monetary Fund (IMF) has established three important criteria for the regulation of cryptocurrency on a worldwide basis.
- Companies that deal in cryptocurrency assets are required to get obligatory permission and license.
- It is necessary to tailor the requirements in accordance with the primary uses of stablecoins and crypto assets.
- There must be a definitive statement on the standard rules that firms that are working in, for, or with the cryptocurrency industry need to adhere to.
Various countries are working on crypto legislation
Some governments remain steadfast in their crypto prohibition, while many others have begun crypto regulatory preparations.
- USA
For instance, the United States is likely in the lead, while facing criticism from several influential groups. Despite the SEC’s Wild West approach to cryptocurrencies, the Treasury has recognized them as legal tender. According to the news, the President’s Working Group on Crypto regulation and the Financial Stability Oversight Council are hard at work creating a workable regulatory framework for cryptocurrencies.
- CANADA
Dealers and exchangers in cryptocurrencies in Canada must be registered with provincial authorities.
- AUSTRALIA
As with other countries, Australia will shortly institute formal crypto legislation. The nation is putting a lot of emphasis on strict regulation for crypto exchanges, among other things.
- EUROPE
The European Union has just agreed a deal to regulate the cryptocurrency industry. Known formally as the MiCA plan, the accord places an emphasis on the introduction of crypto legislation that will apply to issuers of both stablecoins and crypto assets. Financial stability, investor and trader protection, and room for innovation and expansion throughout the crypto industry are all goals of the proposed regulatory framework, as outlined in the agreement.
Why is it important to regulate cryptocurrencies?
To the contrary of popular belief, a regulatory framework is anticipated to enhance crypto adoption and business development. In other words, those who advocate for crypto regulation tend to believe that a legal framework would be good for the crypto business.
- Reduced volatility and increased stability
About $800 billion in investor money was lost in the latest crypto crisis. Volatility has been blamed for the meteoric increase in cryptocurrency values, but it also has the potential to cause catastrophic falls in a matter of days. To put it simply, Bitcoin is a very hazardous investment, much riskier than equities and bonds.
The introduction of crypto regulation is expected to minimize the speculation about cryptocurrencies that has led to big price increases and decreases in the past. Regulating the cryptocurrency market will make it more resistant to outside interference and hence easier to use.
Many believe that crypto’s skyrocketing price increases may be avoided if the industry is regulated. On the plus side, the crypto industry’s reputation for catastrophic losses may be mitigated by regulation.
- Access control safeguards
Investors and traders in cryptocurrencies may be left high and dry in the event of a crisis if there is no framework for regulating the industry. Some marketplaces may now follow state and federal standards, but there is still more work to be done to ensure that consumers are well protected. Simply said, unlike regulated and standardized traditional stock exchanges, crypto exchanges are not subject to the same regulatory compliance.
The absence of oversight in the crypto space leaves a lot of leeway for bad behaviours on the part of service providers and external adversaries. Such illegal activity may be curbed if regulations are put in place to hold crypto-asset organizations more accountable for their actions and to safeguard investors and traders.
- To create a more secure and trustworthy business community
Criminal activities using cryptocurrency are on the increase. A total of almost $14 billion in cryptocurrency was lost to fraudsters in 2021, nearly double the amount stolen the previous year in 2020. Lack of regulation in crypto regarding fraud prevention is a big element aiding the rise in crypto frauds.
By enforcing protocols and standards, regulation in crypto may assist stop fraudulent activity in the crypto scape. It will ultimately aid in increasing the industry’s legitimacy, which will make crypto more reliable.
It’s important to emphasize that experts expect regulation in the cryptocurrency market to not only keep present investors happy, but to attract new investors from all over the globe. A large proportion of would-be investors are wary about crypto owing to the absence of adequate regulation. Instilling some much-needed structure and order into the cryptocurrency industry by strict adherence to the established regulatory framework would make it more appealing to both current and future investors, some of whom may be wary.
- It’s a win for crypto start-ups and pioneers
There are two ways in which the crypto industry and its entrepreneurs will reap the benefits of standardized regulation. One benefit of crypto regulation is that it will make it easier to understand the financial and legal implications of any crypto-related endeavour.
As a result of the absence of rules and guidelines, your company’s development, and ability to turn a profit may be stunted. To successfully expand your firm, you need clarity on three essential areas of your project and operation. The inverse is connected to the above discussion. More people would be willing to invest in crypto projects and enterprises if they felt safer doing so thanks to a solid regulatory framework.
Closing Remarks
Cryptocurrency regulation is necessary, but policymakers must be cautious not to stifle the technology’s fundamental principles.
