Should Governments Regulate the Growing Crypto Market?

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Crypto is a massive industry despite emerging not long ago. The industry has seen an increase in the number of cryptocurrencies in circulation to over 20,000. Apart from that, the industry has gained so much influence, with millions of users using cryptocurrencies for various reasons. You, too, can become a crypto investor by signing up on BitIQ online trading platform.

The crypto industry has primarily operated without government regulations due to the uniqueness of cryptocurrencies. Specifically, cryptocurrencies are decentralized, meaning governments cannot control their use as they do with fiat currencies. For example, governments do not regulate the number of cryptocurrencies in circulation in the economy.

But there have been growing concerns and efforts to introduce regulations to the crypto industry by different governments and even global financial players like the IMF. The crypto industry now includes multiple players, including crypto exchanges and trading platforms. And this has created concerns regarding different issues governments would want to regulate.

Before delving into whether governments should regulate the growing crypto market, it is worth noting that this industry has become mainstream and benefitted many crypto investors and people. 

Why Governments Want To Regulate the Crypto Industry

The growing calls and efforts to introduce regulations to the crypto industry are due to several factors. First, the industry is largely unregulated. Unlike centralized financial institutions like commercial banks that governments control, most crypto players are not. For example, Bitcoin, Ethereum, and other cryptocurrencies are unregulated.

The lack of regulation creates potential loopholes for criminals and other bad actors to use the industry to perpetuate their illegal activities. Thanks to the anonymity and privacy of most cryptocurrencies, criminals have used them to hide their traces. Good examples are terrorism, drug trafficking, and illegal weapons business.

Additionally, governments want to regulate the crypto industry because of social and environmental concerns. Specifically, some have criticized the industry for using so much energy and generating carbon. Bitcoin mining is an energy-intensive process that consumes mind-boggling amounts of non-renewable energy. If left unchecked, this could cause severe energy and environmental crises.

Moreover, governments may fear that an unregulated crypto industry could threaten established financial and economic systems. For example, the crypto industry could undermine traditional banks and systems by pulling many people and business users. And this would mean a loss of revenue, threatening the survival of banks and other financial organizations.

Why Government Regulation Should Be Careful

While most of the reasons for introducing government regulations in the crypto industry are valid, primarily to protect the consumers and prevent illicit activities, the issue of how it will affect the control that crypto has given people over their money. Crypto has given users more control over their funds, including how they access and use them.

Government regulation that threatens this control may not be reasonable. Lessons from the previous global financial crisis of 2008 showed the importance of having crypto as an alternative to the centralized financial system. Governments and a few financial institutions can interfere with how people access and use their money. For example, the central bank can print and release more money into the economy, causing inflation.

Regulating the crypto industry may eliminate or limit people’s freedom over money and finances. For example, the regulations may require providers of cryptocurrencies and related services to provide private information about your crypto transactions even when they are not illegal. 

Conclusion

The issue of government regulation of the crypto industry remains controversial. While there may be some valid reasons for taking this route, the overall effect could be to deny crypto users the control they have over their money.