The Challenges for Crypto Regulation

crypto regulation

We hear the term “crypto assets” more and more every day, and we will continue to hear it for a long time. Virtual assets, which are still in their infancy, continue to grow at a breakneck pace. The value of crypto assets, particularly Bitcoin, is rising, attracting more people’s attention to the market. That attention also gave rise in interest of crypto regulation.

The rapid growth of the crypto industry, which is the most popular in financial technology, is causing some authorities problems. It’s tough to develop laws in this region since we don’t completely grasp the ecosystem’s nature and threats. People from various jurisdictions began collaborating to properly comprehend the nature of crypto assets and address challenges. The rise in the value of crypto assets and how long they will continue to rise is a different story. Authorities believe that with the correct strategies, this growth may be contained. The Financial Stability Board (FSB) believes that a study of the crypto economy is required to handle this growing trend.

The Financial Conduct Authority (FCA) of the UK finished its work on categorizing crypto assets in July. Regulators in European countries are continuing to use the same strategy. Some European countries have begun to invest in FinTech firms and have taken a “FinTech friendly” attitude in their jurisdictions.

The Challenges for Crypto Regulation

In the crypto assets market, as in any other industry, regulatory regimes have various benefits and drawbacks. While attempting to protect investors and customers, regulators must create possibilities for the industry to flourish. It’s difficult to strike a balance between the two.


One of the most difficult tasks for regulators is to appropriately classify current cryptocurrencies. Crypto assets are a result of recent digital technology advancements, and their goal is to give new opportunities for barter, investment, and financial transactions. The hybrid and transformational nature of cryptos is the cause of the challenge when it comes to structuring crypto-assets. This, combined with market trends and the quick rate of invention, makes regulators’ approaches challenging and leaves certain gaps.

Many analysts believe that cryptocurrencies are a whole new asset class. For tokens that act as securities, this categorization may be correct. In general, crypto assets are described as investments that provide various benefits in addition to or instead of their value.


Another issue is the over-regulation of crypto assets, which is suffocating innovation. This is to prevent the sector from expanding. The fast growth in the value of assets such as Bitcoin has fundamentally democratized the ability of newcomers to raise funds.

This highlights the necessity for a set of policies specifically designed to assist cash-strapped small businesses to raise funding from a variety of sources.

Enter Blockchain

Aside from crypto assets, regulators should keep a careful eye on another topic: Blockchain. The truth is that cryptocurrency-supporting blockchain technology is transforming many aspects of the banking and financial industry. In a nutshell, Blockchain is a distributed ledger that ensures a similar copy of encrypted ledger data is replicated. Distributed ledgers are utilized by businesses in various regions of the world to facilitate public activities such as identity management and healthcare services.

Estonia is one of the most effective countries at using Blockchain, which is extensively utilized or being tried in many parts of the world. Estonia’s digital infrastructure is built on a foundation of open-source software. With the exception of Estonia, the World Bank and the Australian Commonwealth Bank have only used blockchain technology to issue public bonds.

The Next Step for Crypto

Cryptocurrencies are still on the rise, despite government and regulatory interference. For certain institutions, this uncontrolled rise is a problem. Regulators’ uncertainty limits the types of investors interested in cryptocurrency. To regulate the market, more innovative solutions are required. To eliminate fraudulent cryptos, these solutions include acting as a good cop and implementing efficient rules through collaboration between government and industry. However, adequate security system provision solutions are still being offered to protect investors from fraud.

In the future, we should expect to hear the names of crypto assets frequently. The investors and entrepreneurs that chase these assets will continue to exist as the asset values rise. Regulators have a vital role to play here. This role entails ensuring security and reducing uncertainty without causing market disruption.


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