Cryptocurrency regulation continues to be a sticking point for the market and the lack of action from governments is not favoring a stable and healthy development of the crypto industry. Most of the people are downplaying the importance of regulation, but as annoying as it might be, it is actually beneficial in the long. In case you are not yet aware of the positive implications, here are just three of the advantages of having laws for crypto.
# Building trust in cryptocurrencies
Although cryptocurrencies had been developed as an alternative for the fiat monetary system, the past few years had thought us that there must be a strict set of rules even for a decentralized currency network. In the absence of regulation, companies don’t follow any security or compliance standards, and ordinary users can get involved in illicit activities.
That is why the trust in cryptocurrencies continues to be low, despite a rebound in valuations. It does not matter if Bitcoin works with the best hashing algorithm. There are some other requirements and one of them is regulation.
# Stimulating institutional investments
Retail money had been flowing into the world of crypto for the past several years, but not the same can be said about institutional investments. These entities had not been stimulated to invest mainly because cryptocurrencies are still unregulated instruments. Cryptocurrency investors see things in the long run and any industry is bound to fail without standards for all the players involved.
Cryptocurrencies can be a diversification asset in any portfolio, but for now, the reluctance continues to stay its course. Will things change when the regulation will be implemented? Of course. We must look at countries like Japan and Singapore, where the private sector, supported by the government, continues to generate blockchain innovations and use crypto in many different areas.
# Reducing the level of industry scam
There are so many different ways a hacker can steal cryptocurrency and we have to ask how many will be negated by regulatory requirements to ensure an elevated security mechanism. Most of the popular exchange platforms had been hacked in recent years, proving to investors that even the blockchain can be vulnerable without strict security measures.
At the same time, the level of scam in the industry will gradually diminish, since uncompliant companies will be squeezed out. As hard as it might be to implement, crypto regulation will provide multiple advantages, even though companies and all users will need to comply with a broad series of requirements.