Cryptocurrency is still considered an unusual asset class to many, despite its legions of devoted followers. There is the possibility to make considerable financial gains trading in digital assets, yet the industry remains largely unregulated breeding distrust.

There are many reasons why regulation is a good thing for the cryptocurrency market, helping the currency to overcome its outlaw image and gain more traction with new and unexpected audiences.

The path to regulation

Few within the world of cryptocurrency are calling for widespread, all-encompassing regulation. Likewise, few people involved in using and trading this asset class are against regulation in its entirety – though they would prefer the right kind of regulations.

Regulation should be carried out with oversight and with caution, as too much regulatory input could have a damaging effect on the crypto market. However, few would now deny that with the global financial market investing in crypto, something needs to be done to reduce corruption and exploitation.

Choosing the right regulations

Due to the decentralisation of crypto, it operates in an entirely different way to other financial products. Traditional regulatory powers are unlikely to suit the world of crypto, and could simply restrict its ability to operate.

Many regulators don’t have much understanding of the blockchain. Whilst it is ostensibly anonymous, in reality, each transaction is recorded and infinitely traceable, providing transparency and a clear record of events. Getting regulation right will require cooperation between regulators and traders, ensuring a new system of regulation that looks to the financial future, not the past.

An aid to legitimacy

Cryptocurrency has been regarded as the Wild West of the financial markets for around a decade. During the early years of its adoption, there was no real rulebook to refer to. Traders and investors often under (or over) estimated the value of the asset class, leading to disruption and confusion.

While too much regulation may make some investors wary, greater regulatory powers also provide a vital layer of both safety and legitimacy, to the benefit of investors everywhere.

Greater crypto regulation is a vital step towards helping to legitimise crypto, and encouraging naysayers to engage with this asset class.

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