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How Crypto Regulation Can Help Crypto Investors

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By Author: shubh
Total Articles: 3
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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.

Regulatory measures that can benefit crypto investors
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.

#4). Consumer protection rules
Despite facing multiple setbacks, the crypto market is thriving. However, due lack of protection rights, investors fear to completely support the market. Regulations that provide consumers with certain rights, such as the right to a refund or the right to raise a dispute in case of any mishappening or fraudulent activities, can help protect investors from being taken advantage of by unscrupulous companies.

#5). Disclosures and reporting requirements
Regulations requiring companies to disclose certain information, such as their financial performance and business practices, can help investors make more informed decisions about their investments.

Further, retail investors are most impacted due to market manipulation by Whales. This implies some of the popular cryptocurrencies as well. Constructive crypto regulations can benefit retail investors from getting exploited by malpractices.

Critics of Crypto Regulations

Though the regulatory environment can create a better marketplace for crypto investors, some of the firm crypto believers find it against the fundamental principle of crypto, which is a peer-to-peer network where no central authority is in power to have an unnecessary intervention.

Further, once the strict regulations are implied, it becomes difficult for the new market to prosper as it may stiffen the continuous innovation happening in the web 3 space. It can also increase the project’s overhead cost on compliance, which may discourage innovative startups.

Regulations can help improve investor education by requiring companies to provide more information about their operations and financial performance. Increased transparency will make the investors understand how their investments are being used and make informed decisions about their investments.

Further, a regulated market can help stabilize the market and reduce volatility, making it easier for investors to make informed decisions about their investments. Though some countries have already started formulating various regulatory frameworks around crypto, there is a long way to go.

Overall, these types of regulations can help create a more stable and transparent market, which can be beneficial for retail investors. However, it’s important to note that regulations can also have unintended consequences and may not always be effective in achieving their intended goals.

Crypto products are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
This is not an investment advice. Please do your own research before investing.
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