Crypto regulations have been on the rise, with various financial watchdogs tightening their noose on the market. While some investors may seem jittery about these regulations, they may benefit the industry in the long term.
One of the financial watchdogs who has been extra strict on safeguarding crypto investors is the UK’s Financial Conduct Authority. The regulator introduced new regulations that were aimed to curb money laundering and terrorism financing. Some of the restrictions sent ripples in the market and may have been a catalyst towards the recent market crash. However, some analysts believe that the crash may be good for the long term.
Good for the Crypto Market
There are many reasons why the increased regulations may be good for the crypto market. Most people have been hesitant to join this sector because of the fear of cryptocurrencies being used for criminal activities. However, regulations may help change this perspective.
The FCA and other regulatory bodies boosting the regulatory framework surrounding cryptocurrencies will give this market some form of legitimacy. When the FCA can crack down on criminals using this sector to their advantage, it will persuade more institutional clients to embrace what the market offers. Institutions will trust Cryptocurrencies as a store of value and even extend crypto offerings to clients.
The crypto market is known for its anonymity because this is how the whole blockchain system was designed to work. However, anonymity poses a great challenge for regulators. However, with the recent crackdown from financial watchdogs, companies dealing with cryptocurrencies have been forced to embrace KYC procedures to verify their identities and monitor their transactions.
KYC measures are a great thing for the crypto industry because they will boost trust. In addition, it will also make cryptocurrencies more appealing to governments and increase the likelihood of being used as a means of payment. Since the introduction of KYC measures by crypto exchanges, most investors have been willing to comply.
Create Room for More Regulations
The newly launched regulations will also benefit regulators, as they will help identify any loopholes. It will also expose all the vulnerabilities in the crypto market to help regulators figure out the best way forward.
Currently, regulators are having a hard time finding the best way to control the crypto sector. However, the small steps taken now can be used as a test phase that will identify all weak spots. Eventually, these regulations will lead to the crypto sector being embraced fully into the broader financial service sector.