Why I support cryptocurrency regulation and why it’ll boost demand
Financial regulators around the world are increasingly looking at cryptocurrencies, such as Bitcoin, Ethereum and Ripple, and this is something I wholeheartedly welcome.
As I wrote in a column for The International Business Times, even those who are cynical of cryptocurrencies, should be championing the vital work being done by regulatory bodies in this area.
Why is it so vital? Well, because whether traditionalists like it or not, cryptocurrencies in some way or another are already here and are here to stay. Whether it’ll be Bitcoin, Dash, Litecoin, Ethereum or Ripple or any of the others in the future that are dominant, remains to be seen. But in an increasingly digital world, digital currencies aren’t going anywhere; in fact, the market is only set to grow and their importance in our day to day lives will increase exponentially.
Therefore, moving forward, we need a robust regulatory framework to help protect both retail and institutional investors, help combat cryptocurrency criminality, and reduce the potential threat of disrupting global financial stability, as well as offering a possible long-term economic boost to those countries which introduce it.
As such, I was extremely pleased last week when the Bank of England (BoE) Governor, Mark Carney, gave a statement on this issue, in which he said: “The time has come to hold the crypto asset ecosystem to the same standards as the rest of the financial system. Being part of the financial system brings enormous privileges, but with them great responsibilities…In my view, holding crypto asset exchanges to the same rigorous standards as those that trade securities would address a major underlap in the regulatory approach.”
It was almost exactly what I had said just days earlier to the media: “There is no question that regulation is necessary and is on its way. It is clearly an area in which there is an enormous need for a robust international regulatory framework and strict ongoing supervision. One of the best ways to address the regulatory issues is via the exchanges.”
The Bank of England’s new stance on this area is powerful because it is one of the world’s most influential central banks and therefore others can be expected to follow their lead.
Not only do I believe that cryptocurrency regulation is needed for the reasons I set out above, I also believe it will provide a sustainable long-term demand for these digital tokens.
There are some who believe that regulations have an adverse affect on markets – I do not share this view. That is short-sighted and misguided. In the longer-term, regulation bolsters certainty, credibility and legal assurance and this translates into confidence and, typically, a long-term upward trend. We saw this was the case for Bitcoin in Japan when Tokyo started regulating the token. The market dropped at first, but eventually it rose. The same thing happened in Australia.
To conclude, I am confident that cryptocurrency regulation is on its way, is necessary and will help further bolster demand for the likes of Bitcoin, Ethereum, Ripple, Litecoin and Dash.