The need for regulatory compliance for cryptocurrencies

Just a few years ago, no analyst could formulate, based on an adequate set of arguments and data, the rapid explosion in the cryptocurrency market. And yet, the fact is that this market now has a capitalization of close to 2.5 trillion dollars.

The predetermined amount of a cryptocurrency is a comparative advantage for their supporters because it adds value to cryptocurrencies. While the logic of the finite quantity of a cryptocurrency opposes the central banks monetary policy that print as much quantity of money as they deem necessary, in order to create the expected interest rate and inflation levels. 

The debate over whether cryptocurrencies could replace existing currencies in the future is on the table, especially among cryptocurrency advocates. However, to confirm such a scenario, the economic model as we know it today will need to change radically and fundamentally.

A big issue of this change concerns the regulation of this market since in essence there are no rules or guarantees for the protection of cryptocurrency holders. The money in a deposit account in a currency is guaranteed to a level by the movement and central banks. In the case of cryptocurrencies, this guarantee does not exist. There is no one you can turn to. In crypto, everyone is involved, but no one is responsible for a possible loss. In addition, there are people who have a strong influence on the price of cryptocurrencies, such as Elon Musk, founder of Tesla, or Changpeng Zhao, head of the Binance exchange.

The decentralized structure and the large influence of some entities on cryptocurrencies make the need for the involvement of the regulators urgent. The authorities were slow to realize that they should have gotten involved in this trillion-dollar market earlier, but there is now a strong mobilization to somehow regulate this market. For banks that want to get involved in this market, new rules require the cryptos will be subject to capital requirements that will include stablecoins. 

However, regulating financial products traded online in the blockchain on a global scale is a major challenge for regulators as they will always have to find the optimum solutions that catch up with technological developments.