Will 2018 be the Year Cryptocurrency Rule Making and Enforcement?
2018 has seen regulators accelerate the pace of cryptocurrency rule-making and enforcement. Since the start of the year, countries across the board have begun to consider regulating cryptocurrency trading. This move was largely influenced by the high speculation in 2017 that saw Bitcoin hit its highest price of about $19,000. Beside the rapid price increments, Bitcoin also enjoyed a rising adoption towards the end of the year, capturing the attention of governments.
At the turn of the year, South Korea and China became the first countries to take a stand on cryptocurrency trading. On its part, South Korea passed a regulation that barred anonymous trading of cryptocurrencies. China, on the other hand, took a more radical approach and banned trading all together.
According to Roman Guelfi-Gibbs, CEO of Pinnacle Brilliance, the move by governments to regulate cryptocurrencies was anticipated.
"Crypto has long been the home of rebels, anarchists, and libertarians. Of course as crypto gained notoriety, it was bound to attract investors and mass public interest. When the public gets involved and market cap reaches a certain amount, government always steps in under the banner of looking out for consumers and fighting criminal behavior," he says.
Not necessarily bad
For many players, the regulation of trading in the cryptocurrency space is not necessarily a bad thing. In fact, it’s necessary to legitimize cryptocurrency and make it attractive to investors.
Andrei Huseu, CEO of WealthMan says, "As a result of this, cryptocurrencies will receive more recognition. Interest in crypto currency will increase. At the same time, the regulation norms in terms of enforcement will not be really effective because of the inability of the judicial system to make changes to the blockchain-based registry."
Enforcement of cryptocurrency regulations will also help address the rising cases of fraud and scams that keep investors at bay.
Guelfi-Gibbs says, "We know that crypto has had more than its share of scams, so regulations will help to stop such things from happening. Without proper regulations, institutional investors will stay away and mass adoption will not happen. So some regulations could be helpful for the sector to reassure investors and the public. The problem that must be avoided, is the stifling of innovation due to heavy handed regulation. We will have to see how this pans out."
As more governments prepare rules to guide cryptocurrency trading in their jurisdictions, crypto startups could experience difficulties due to the uncertainty associated with regulation.
"In the short term, regulation creates a more difficult business environment, as service providers decline to work with crypto startups due to uncertainty and a perceived threat of imminent and restrictive regulation," notes Dr John Mathews, ACA, Chief Finance Officer, Bitnation.
Last month, announcements by South Korea and China about impending cryptocurrency regulations contributed to the panic in the market that led to a massive sell-off and a dip in cryptocurrency prices.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.