The impact of regulation on the trading of cryptocurrencies
In recent years, the cryptocurrency world has experienced rapid growth and evolution. With the advent of decentralized cryptocurrencies such as Bitcoin and Ethereum, many people took advantage of the high yield potential by exchanging these digital assets. However, with the growing popularity of cryptocurrency is an increasing concern about regulations. In this article, we will explore the impact of the regulation on the trading of cryptocurrencies and will examine the current regulatory landscape in various jurisdictions.
Regulatory environment
The regulatory environment surrounding cryptocurrency is complex and constantly evolving. In 2017, the cryptocurrency market experienced a significant increase in popularity, many new investors entering the scene. However, as the market increased, concerns about security risks, volatility and illicit activities. Regulators around the world responded to these concerns by introducing regulations to limit the use of cryptocurrencies for illicit purposes.
Types of regulations
There are several types of regulations that affect the trading of cryptocurrencies, in particular:
- Mary’s money laundering (AML) : AML regulations require exchanges and other financial institutions to verify the identity of their customers and report suspicious transactions to the regulatory authorities.
- Know your client (KYC) : KYC regulations require exchanges to verify the identity of their customers and store customer data in the file for a specified period.
- Capital requirements : Capital requirements are designed to prevent banks from lending too much money to cryptocurrency projects, which can lead to a speculative bubble on the market.
- Regulations on securities : Regulations on securities govern the trade in cryptocurrencies as securities, similar to shares and obligations.
Impact on the trading of cryptocurrencies
The impact of the regulation on the trading of cryptocurrencies varies according to the specific regulations implemented in each jurisdiction. Some countries have adopted a more relaxing approach, while others have introduced stricter regulations that have had a significant impact on the market.
Positive impacts
Regulations can also give a positive impact on the cryptocurrency trade by:
- increasing safety : regulations such as LMA and KYC help prevent money laundering and other illicit activities.
- Stabilizing Markets : regulations and capital requirements can help stabilize markets by preventing excessive speculation.
- Improvement of consumer protection : regulations like LMA and KYC offer consumers greater protection against scams and phishing attacks.
Negative impacts
Regulations can also have negative impacts on trading of cryptocurrencies, in particular:
- Restrictions on trading : Some regulations restrict the ability to negotiate cryptocurrencies, such as the requirement of a license or register for an account.
- Increased cost : Regulations can increase the costs of trade and other companies operating on regulated markets.
- Limited availability of services
: regulated services such as childcare portfolios can be limited or unavailable due to strict regulatory requirements.
Jurisdictional variations
The regulations surrounding the trading of cryptocurrencies vary considerably from competence to competence. Some countries have adopted a more relaxing approach, while others have introduced stricter regulations that may have a significant impact on the market.
United States: a mixed bag
The United States has been at the forefront of regulation in the cryptocurrency space. In 2017, the Act Corner prohibited the promotion of cryptocurrencies as an investment swap and, in 2020, the SEC published an orientation document describing its regulatory position on digital assets.