Why it is necessary to regulate cryptocurrencies

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Viktor Prokopenya is a London-based fintech investor and founder of VP Capital, an investment vehicle focused on the technology sector .______

Could we live in a world without rules? In theory, yes, we can live with the absence of a government, and indeed our earliest ancestors did. At its extreme, this is called anarchy, a state of disorder and anarchy.

In fact, human beings have discovered that regulations are the building blocks of a harmonious society and are fundamental to development. Structures and rules are needed to promote a positive culture.

Nobel Prize-winning economist Elinor Ostrom noted that when people have to manage shared resources such as land, fishing, or water for irrigation, they spontaneously build rules.

In fact, throughout history, we have seen that every evolving sector goes through a process that ends to a greater or lesser extent with regulation. most regulated sectors are those with the potential to cause the most damage.

Take the case of the now heavily regulated pharmaceutical industry so that people around the world can rely on safe and affordable medicines to protect their health. Before regulation, there were opportunistic scammers selling fraudulent cures to gullible members of the public.

Education is another example where regulation ensures that different institutions maintain the same high standards, to build trust across the industry. Food supply and hygiene are also strictly regulated to safeguard a basic human need. In these and countless other areas, regulation has had positive benefits.

Currently, this debate is raging around cryptocurrencies. Tesla CEO Elon Musk recently wondered if the US government should be involved in regulating the crypto space. “It is not possible, I think, to destroy cryptocurrencies, but it is possible for governments to slow down their advance,” he said. ‘I would say,’ Don’t do anything. ‘

whole world of cryptocurrencies is driven by one word: freedom. mere fact that governments cannot access your wallet is already a huge victory when it comes to freedom.

However, this does not mean that cryptocurrencies should be used for criminal purposes and that their image is ruined by a minority who use them for money laundering or crime.

This is especially true in emerging markets, where we must protect both the system and consumers. Look at labor rights in places like Cambodia, which would certainly regress in the absence of strong regulatory frameworks. Here, regulation acts to support economic growth and freedom.

refore, ensuring that the industry is transparent, clear, and law-abiding is the key to maintaining freedom.

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So, for my part, I firmly believe that cryptocurrencies should be regulated. Also, I believe that the industry should actively lead the way and focus on the positive impact that regulation can bring.

Why?

Because until now, cryptocurrencies have been the new Wild West, and if we want to change that and become part of the respectable financial framework, we have to accept that regulation is a necessary part of growth.

Binance regulation ignored for too long and watch what happened – it is now banned in many economies while allegations of tax fraud and money laundering are being investigated. However, regulation will come as our industry grows, so welcome. re are those who would like to stop the sector completely, prohibiting financial institutions from trading cryptocurrencies and we play their game if we do not sit down at the table and behave responsibly.

Take the case of technology companies. fact that tech companies collected data without limits has led to GDPR and similar laws. y are now subject to an imposed framework and heavy penalties for not complying with regulations. If tech companies had worked more responsibly with customer and regulator data, the restrictions imposed could have been much lighter.

This is because, left alone, regulators are wrong on the side of eliminating freedom. Working with regulators is the key to preserving freedom. Freedom is really a choice. Previously, companies could choose what to do with the data. Now, that option has been removed.

Dialogue with regulators is the way to preserve this choice. If we want our industry to move forward, there is only one way to go: we must help governments shape regulation.

Hiding from this fact is childish and irresponsible with employees, partners and consumers. problem with a “head in the sand” approach is that one day you wake up to see that the world has changed without you, and probably not in the way you wanted. Rather than having to adapt, it is much better to shape this change.

We, industry pioneers, must act as custodians of the system, preventing misuse and protecting consumers. On the contrary, regulation without the help of professionals can lead to errors and misjudgments, consequences and unwanted risks. After all, we are certainly not the first industry to start without rules. Twenty years ago, only a handful of countries mentioned the word “internet” in their legislation. Today, most legal systems have adapted to the new connected world. same will happen with cryptocurrencies, whether we want it or not. key is to guide this process and do it well. refore, dialogue, discussion and debate fueled by informed opinions is the only way to go.

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This will involve linking with policy makers in the UK, the EU and the US, along with governments in other parts of the world where cryptocurrency mining and processing is currently located.

So what would good regulation look like?

Cryptocurrencies are currently largely unregulated in the EU. proposal of the European Commission Regulation of cryptocurrency markets (MiCA) is being examined by the European Parliament. It will be part of the EU digital finance strategy and is likely to have a significant impact on the functioning of the cryptocurrency market in the EU.

Again, it is helpful for experts to help shape this regulation. Of course, we must ensure that cryptocurrencies are not a safe haven for money laundering, criminal funds, or other nefarious activities.

World Economic Forum’s Global Future Council on Cryptocurrencies is producing interesting work in this field, such as his paper Navigating Cryptocurrency Regulation: An Industry Perspective on Information and the Tools Needed to Model Balanced Regulation of Cryptocurrencies. cryptocurrencies.

Kalifa’s review of UK FinTech rightly recognizes that FinTech is not a niche or subsector, but a permanent technological revolution that is forever changing the way finance works. It also frames development in this area around trust and its necessary foundations in leadership, regulation, and the rule of law.

Some green principles that address the carbon footprint of cryptocurrencies are likely to be included in future regulation, and that’s fair enough: we need to make sure that cleaner technologies and energy sources are used if we want next-generation finance. are sustainable. Critically, we do not need to view regulation as an inherent threat.

Part of the problem here is that cryptocurrencies are disruptive technology, so the people involved tend to be innovative thinkers, who don’t like to be limited by rules.

re are others who are protectionist, fearing that the general attention will erode their profits. Human progress is not driven by fear, yet it prevents us from making the most of our potential.

To be truly smart, we must overcome this natural reaction and accept the positive aspects that regulation brings, because those responsible for the rules are not necessarily opposed to financial development. In general, they realize that this is a genie that cannot be put back in the bottle, and can only be tamed and made a friend.

At both national and EU level, European regulators have expressed support for blockchain technology and its potential for digital transformation in the financial sector. defined objective of this regulation is to create a regulatory framework oriented to investment and growth.

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And this is where governments and cryptocurrency pioneers agree, growth can only benefit us all.

We can expect regulation to promote consumer and investor protection, market integrity, and financial stability, leading to increased industry legitimacy. This synergy will attract new investors and allow cryptocurrencies to expand into the mainstream.

Over time, this will lead to increased legitimacy in the industry. In turn, the best traders will rise to the top and become more profitable, with shady competitors disappearing from the market.

Regulation is the next frontier for cryptocurrencies, it is a sign of the success of our industry. We should not fear it, but rather adopt regulation at the end of the next phase of cryptocurrency development.

______Learn more: – FATF wants to ‘gut’ DeFi with new ‘vague’ guidelines, cryptocurrency players say – Regulators arrive for DeFi goose and its golden eggs

– ‘Don’t Lull’ as European Commission Ponders a KYC Encryption Trap – FATF Makes Small Crypto Platforms Easy Prey for Big Players

– regulator is like a ‘bulldozer’, but cryptocurrencies are ‘resistant to state control’ – Prepare for 6-12 months ‘truly volatile’ in the sphere of crypto regulation – Novogratz

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