In the wake of recent events, self-regulation has been talked about as a way to help protect investors in the cryptocurrency market. But how should it be done?
While self-regulation could benefit both traditional and digital currency markets, there are significant challenges that must be overcome for this to happen.
The wild growth and volatility of cryptocurrencies have driven a number of investors to question the long-term viability and staying power of digital currencies, especially in light of falling prices.
However, there may be a way for cryptocurrency markets to protect themselves from these challenges – through self-regulation.
Self-Regulation in Traditional Markets
Self-regulation is not new to traditional financial markets.
Many countries and groups of companies and organizations have created their own regulatory guidelines, though some major countries like the U.S do not yet have a national, overarching set of regulations for cryptocurrency markets.
Self-regulation has been helpful in creating clear standards for brokers, exchanges, and traditional currency investors that allow individuals to feel more comfortable investing in cryptocurrencies.
Self-regulation groups like the Virtual Commodity Association (VCA) and the Blockchain Transparency Institute (BTI), for example, are dedicated to encouraging transparency in cryptocurrency markets.
With these guidelines in place, investors feel more secure when deciding how to invest their money. Self-regulation also helps investors stay aware of existing laws and prevents them from violating those laws by ensuring that companies are operating ethically.
Why Self-regulation in Cryptocurrency Matters now more than ever
Cryptocurrencies are just now starting to gain mainstream attention, but the market has already been through some major growing pains.
Not only have cryptocurrencies taken an enormous hit during 2018’s ‘crypto-winter’ – a term used to describe the current state of the cryptocurrency market as it has plummeted in value since January 2018 – but there have been other major issues that have threatened the stability and security of cryptocurrency markets.
A number of ICOs have been found to be fraudulent or were otherwise misrepresented, such as PlexCoin and Pincoin.
Additionally, the prevalence of crypto-mining malware has increased by over 900% in 2017 and continues to proliferate. Cyberattacks such as cryptojacking also pose a growing threat to investors and consumers.
These incidents highlight the need for better self-regulation in cryptocurrency markets. Cryptocurrency markets continue to face security issues because they operate very differently than traditional financial markets. However, with proper risk assessment and industry standards in place, these risks can be minimized – something that is already happening in parts of the world, such as in Japan.
Self-regulation could help protect both cryptocurrency investors and consumers on Bitcoin Up by ensuring that companies are held accountable for their actions.
It also helps to counter money laundering and fraud, which can happen when investors do not have access to information about market founders.
A single cryptocurrency may also attract different levels of regulatory oversight, depending on how it is structured or what its purpose is. This requires self-regulation organizations to work with industry experts and developers to create clear guidelines.
Self-regulation sounds like a good idea, but how do we know it will work?
Even if self-regulation means that cryptocurrency markets are more transparent and secure, there are still some potential drawbacks or concerns. Since the crypto market is still relatively new, we will just have to wait and see how effective self-regulation is in the long run.
Some experts believe that self-regulation organizations can help shape cryptocurrency markets, but they might struggle to enforce regulation since their success depends on voluntary compliance from industry members.
Others have warned against having too much reliance on self-regulation, as cryptocurrency investors could lose faith in the young market if there is a lack of proper regulation.
