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- 1 Rising scams in the sector have become a major concern.
- 2 Middle or low-income countries might have an increased exposure to crypto-related risks.
Crypto regulations are becoming a matter of concern for the past few months. The Securities and Exchange Commission’s (SEC), the U.S. regulatory watchdog, stern approach to take control over the sector has had a considerable impact on the digital asset market recently. CoinMarketCap data shows major declines in assets including Ethereum (ETH), Cardano (ADA), Solana (SOL) and more following the agency’s clampdown.
Regulators Have a Long Way to Go
A recent blog published on June 7, 2023 by Atlantic Council, an American think tank, suggests three challenges in crypto regulations. Rising popularity of crypto assets globally has brought investors from different countries together. Although the money they poured was not a piece of cake for everyone.
While virtual currencies offered a mouthful of profits during its peak during November 2021, the following year proved a disaster. Additionally, rising scams in the sector are another major concern. The Atlantic Council says, “Consumers participating in crypto-markets are exposed to considerable risk. Theft is increasingly common. Volatility, often fueled by speculation, is a defining feature of crypto markets.”
Year 2022 saw a couple of ecosystems including TerraUST and FTX collapsing in the blink of an eye. Shockwaves from the cratering of crypto heavyweight, FTX, were felt beyond the virtual currencies. It simply took 48 hours and a few tweets to dismantle Sam Bankman-Fried’s sprawling empire.
The event raised concerns regarding the sector’s stability in the long run. The Atlantic Council writes in their blog, “Many exchanges are not sufficiently transparent about their operations, finances, or governance, leaving investors in the dark on key matters.” FTX was among the leading and most trusted crypto exchanges in the sector.
Crypto adoption in middle or low-income economies is rising. Given the anonymous and decentralized nature of digital currencies, these nations may be at risk concerning financial stability. According to the Atlantic Council, “It is worrying that some low- and middle-income countries, who may be vulnerable to crypto-induced shocks, have active crypto-markets with few regulations.”
Nations Are Exploring CBDC Use Cases To Replace Crypto
Currently, El Salvador and the Central African Republic (CAR) remain the only nations accepting Bitcoin, the largest cryptocurrency by market capitalization, as a legal tender. The crowned assets peaked at nearly $70K in 2021. Currently, the virtual currency is changing hands at $25,929, an over 60% decline since its all-time high.
Regulators in several countries have introduced bills to regulate cryptocurrencies. The European Union (EU) came up with Markets in Crypto Assets (MiCA) to impose tighter rules and more disclosure obligations for crypto related entities. The bill is likely to come into effect next month.
Several nations are working on central bank digital currencies (CBDCs), considering it an alternative to crypto assets. However, presidential candidates including Florida Governor Ron DeSantis and Robert F. Kennedy Jr. are not in favor of CBDCs. They believe the technology might give too much control to the authorities.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
