An Increased Focus on Regulating Cryptocurrency

Recently we discussed the newly popular NFTs and their implications in the ever-growing blockchain-backed cryptocurrency industry. With so many innovations and new ideas associated with the crypto industry, regulatory bodies have struggled to keep up. Especially the United States government, which is still debating how to regulate crypto and its related blockchain-backed financial products. Some topics of contention are taxation, safety nets, and protections for investors. In this blog, we will unpack some of the discussions around crypto regulation, including cryptocurrency and NFTs.

When the JOBS Act was passed and Rule 506(c) became a prominent offering type, private placements were in need of regulation, and crowdfunding was the newest trend for Issuers and Investors alike. Similarly, cryptocurrency is a brand new concept, and many claims it is in need of some government oversight. With crypto growing in popularity, the SEC has renewed its focus on the risks of digital assets. The Division of Examinations has laid out plans to increase and simplify their oversight of Issuer trading digital assets. You can read more about that here. The point being in the United States has been playing catch up with other countries and is starting to take digital assets, especially crypto, more seriously.

Countries such as Japan are way ahead of the game in terms of cryptocurrency regulation and integration. Firms that deal in cryptocurrency must be officially licensed by the Japanese government and are held to many of the same standards as other traditional currency exchanges. Other countries such as South Korea, Switzerland, and Portugal are all attempting to generate cryptocurrency industries in their nations. They see it as a viable currency, even if those countries do not recognize it as legal tender. That being said, those nations are well on their way to becoming crypto hubs and leaders in this new world of digital currency exchange.

There are even reports that the Biden administration is brainstorming some ways to regulate the crypto industry to catch up with the rest of the world mentioned previously. Although there are no tangible details of what type of regulation or oversight will come of the new administration, as cryptocurrency is one of the most important financial markets of this era, the powers at be such as Janet Yellen are sure to be working in the United State’s framework for this new financial technology. The SEC Commissioner Hester Pierce is working on a “safe harbor” proposal that she recently updated regarding token asset trading. Most of the proposal’s ideas are geared towards helping start-up companies engaged in crypto markets.

Although increased regulation brings about obstacles, the United States taking crypto seriously legitimizes an industry with many naysayers. The crypto news has a breakneck pace, much like blockchain technology, so keep an eye on the VerifyInvestor.com blog or any of our social media accounts for updates on the latest and greatest financial technology topics.

Updated 7/10/2023

Cryptocurrency regulation plays a pivotal role in creating a dynamic and secure environment for participants in the digital currency ecosystem. Firstly, robust regulations are crucial for shielding consumers from the widespread fraudulent activities and scams that thrive in the decentralized and less regulated cryptocurrency landscape. By implementing stringent measures, including standards for security, privacy, and anti-money laundering, these regulations effectively combat financial crimes and safeguard individuals' valuable assets. Secondly, regulatory frameworks, such as Reg D, significantly contribute to building investor confidence by providing a transparent legal framework and comprehensive oversight. This, in turn, attracts institutional investors, propels broader cryptocurrency adoption, and effectively manages risks associated with market manipulation and excessive speculation. Lastly, cryptocurrency regulation promotes seamless integration with the traditional financial system, enhancing interoperability, transparency, and accountability. Striking the right balance between innovation and investor protection, these regulations unlock the full potential of cryptocurrencies while ensuring the utmost security and prosperity for accredited investors and the overall financial ecosystem.