The Not-So-Grim Reality of Cryptocurrency Regulation

Throughout the exciting and unrestricted cryptocurrency rise of 2017 and to this day, regulation has often been portrayed as the enemy to be feared and fought.

However, as the cryptofinance market settles into a more realistic position in 2018, public sentiment towards regulatory efforts is gradually flipping, and more figures in the financial sphere are arguing in favor of regulation, outlining the pragmatic necessity of it, and generally taking a more grounded approach to the discussion compared to the previous year.

So what can we deduce from the clearly inevitable approach of cryptofinance regulation?

The Fears

A rather self-perpetuated apprehension among cryptocurrency users is that the more regulation is applied to decentralized currencies, the more investors will be driven back towards traditional finances due to lack of sufficient incentive to stay.

Unlike other perceived downsides, this one creates a circular loop of consumer confidence that can only be broken through observable results of regulation that is still in the works.

Another major contention is that regulation will burst a bubble and set the entire cryptofinance market back far, possibly even to an unrecoverable state.

Of course, on the topic of finance, whether traditional or crypto, bearish attitudes are the norm. History, however, supports the bullish, as financial collapses are shown to generally be impossible to prevent ahead of time but possible to recover from, making a bursting bubble a troubling scenario but not a doomsday prophecy.

By the same token (no pun intended), cryptocurrency users aren’t too thrilled to get back in bed with government meddling in their monetary affairs after escaping their clutches into the blockchain.

Yet the net benefit of decentralized financial technologies is evident to those who look deeper into just how their funds are processed in the blockchain, making this particular fear’s dissolution a matter of time, as more users learn the key advantages granted to them by cryptocurrencies even with regulatory intervention.

The Benefits

The most overarching and abstract upside to regulation in the cryptosphere is the legitimacy it grants and all of the positive psychological driving forces such legitimacy yields for the market at large.

With finance being driven by human emotions to a considerable degree, it’s safe to say that while the Wild West style market cap landscape of 2017 was good for the emerging field in the short run, lawful operations on finances within the blockchain are what’s needed for long term consumer confidence.

On the more practical side of cryptofinance prospects, regulation is basically mandatory for market growth through attraction of institutional funds.

This is no surprise to anyone who takes a critical look at the kinds of fund managing challenges financial institutions in the traditional financial market find themselves facing constantly, as regulatory support not only assists but makes possible the kinds of large-scale investment choices found in the space.

As for individual consumers, who generally risk losing less total funds to a chaotic market on a per person basis, regulation brings more trust in the overarching system of cryptofinance by preventing scams.

This, coupled with the simple desire to be able to actually use cryptocurrencies to pay for goods and services, encompasses most of what the non-trading, non-investing crowd is most interested in, and that kind of reliability requires long term commitment to legal operations — just as long as governments don’t overplay their hands this time around.

The Bottom Line

The topic of cryptocurrency regulation can best be summarized as a temporal one.

Time is the critical factor when considering the effects of regulation on the cryptofinance market, but it’s also the variable that maps directly to user sentiment towards regulatory efforts.

In short, user understanding of cryptocurrency reality depends majorly on how much time passes and how much knowledge about all relevant issues accumulates in public consciousness. Consequently, it shouldn’t be hard to see why as more time passes, the market’s overall views on regulation are softening.

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In the end, we all have to face reality, but that doesn’t mean throwing out the benefits brought about by the technological and financial innovations in the blockchain space.

At Ternion, we’re dedicated to tackling the financial side of this complex matter by showing the advantages of taking a pragmatic approach to cryptofinance through respect for market forces and the value brought about by financial institutions and regulatory compliance. Find out more here.

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