How Crypto Regulation Can Help Crypto Investors

Whether it is Mt. GOX or FTX, investors lost billions of dollars, and there is no single reason for failures. However, the lack of adequate regulatory measures is one of the crucial factors behind the terrible market crash.

Do you think the breakdown could have been tackled if there were specific regulations around cryptocurrencies and how a majority of the exchanges operate?

Yes, there is a high probability that it could have been better. In the last 5 years, the industry has grown rapidly, and in 2021, the daily trading volume of the top 20 crypto exchanges crossed $100 billion. It is next to impossible to neglect the new way how finance will work in the future. However, the government can take the initiative by creating a regulated environment to ensure customer safety and how finance will work. However, the government can take initiatives by creating a regulated environment to ensure customer safety and transparency in the ecosystem and restrict money laundering through the unknown ways of the crypto market.

Regulatory Measures That Can Benefit Crypto Investors

There are several specific cryptocurrency regulations that could potentially benefit retail investors. Some of them have already been initiated, and others are in the pipeline.

Some examples include:

#1). Registration requirements

Regulations requiring cryptocurrency exchanges and other companies to register with regulatory bodies can help ensure that these companies are subject to oversight and accountability. This can help protect investors from fraudulent or unethical practices.

#2). Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements

Centralized Crypto Exchange in most countries adheres to the KYC. The KYC is followed to verify the customer’s identity so that in case of any mischief, crypto exchanges can report suspicious activity to the authorized body and prevent money laundering and other illegal activities. This can help in creating a more transparent and trustworthy market.

#3). Capital requirements

While looking at the FTX failure, one of the major causes of the market fall was liquidity crises in the exchange. Ftx could not pay the users’ funds and thus filed for bankruptcy. Regulations requiring companies to maintain a certain level of capital can help ensure that they have the financial resources to meet their obligations to customers. This can help protect investors from losing their money if a company becomes insolvent.

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