There has been a question about the regulation of digital currencies. Some countries have banned the use of crypto and again legalised its use. However, some countries have already taken a step in regulating digital currencies. Regulating cryptocurrencies isn’t a walk in the park because there are debatable questions about them because of the nature in which it exists. Legalisation is not regulation, and lack of regulation is still scaring people and holding them from joining cryptocurrency.
Decentralisation is the biggest challenge towards regulation. The nature of digital currencies is decentralisation. They exist without being backed up by any assets, and relating it will violate their principle. Digital currencies use blockchain technology, allowing people to transact with low fees or no cost. They also allow peer-to-peer transactions and people to own their money, unlike in fiat currencies, where the government and financial institutions centrally own money.
Regulating crypto means making it centralised and controlled by the government, which will determine the prices to involve intermediaries in the transactions made. This is what the crypto aims to eliminate. Cryptocurrency is a new technology that nearly everyone, including the regulators, is still learning. People still feel that crypto is in the infancy stage, even if it’s been around for a while. The technological advancements that have brought about digital currencies keep innovating the sector, so people are still learning the new technology in crypto.
Difficulty in classifying crypto also makes it challenging to regulate crypto. The regulators cannot regulate a monetary system that they haven’t yet fully understood, so they are still testing to see how crypto works so that they can be able to put across regulatory measures. There is a need to understand the solutions to solve the problem of scammers so that when regulating crypto, the government knows how the question of losses resulting from scammers may be handled.
There are different types of crypto, and it is difficult to group them. Digital currencies have emerged to help people transact better, get better investment options, and give people an alternative for payments. The transformation in crypto keeps occurring, and there are technological innovations daily, making crypto hard to classify and hence difficult to regulate. There is a need for more creative solutions to be able to regulate cryptocurrency. Blockchain technology is innovative, and for the regulators to be able to put regulatory measures, they need to be creative to set rules that will not violate the crypto’s existing principles.
Cryptocurrency has existing principles, including decentralisation, transactions without middlemen, and not being backed by assets. Therefore, when it comes to regulating crypto, these principles pose a great challenge to regulators. There is a need to take more time to learn the technology involved in crypto to determine the regulatory measures. Regulating cryptocurrency should ensure measures that will be set will not make investors who joined quit the market. Still, it should ensure that the measures set will attract more investors to crypto.
