The crypto industry has been left in splits, especially after the events that have unfolded in the past. The dawn of a multi-billion dollar exchange overnight is an event like none other.
Besides, let’s face it, considering the fall of FTX exchange and its FTT token, a majority of investors and traders have their own thought around the need for a clear regulations concerning crypto. While the movement was still a work-in-progress, Binance’s CEO Changpeng Zhao came up with an impact in his latest speech at the G20 event.
Continue reading as we uncover the speech in details, unveiling the possible details and the impact it could have in the market.
Why Crypto Requires Regulation?
Although cryptocurrency exchanges have existed for over a decade, initiatives to regulate them have only recently risen to the forefront of the policy agenda.
This is partly because crypto assets have recently evolved from specialized goods searching for a buyer to being more broadly utilized as risky trading, insurance against depreciating currencies, and potential payment methods.
Gary Gensler, the chairman of the US Securities and Exchange Commission (SEC), stated in an interview with Financial Times last year that he thought regulation was necessary for the survival of cryptocurrency platforms. However, Crypto platforms have recently gained popularity among those involved in cybercrime.
This is a significant leap from Satoshi Nakamoto’s initial concept, who created bitcoin to bypass government-controlled financial institutions in the wake of the 2008–2009 financial crisis. However, just as landscapes change, so do philosophies.
In the 14 months leading up to Q1 2022, scammers took more than $1 billion from 46,000 victims through crypto-scams, based on the Federal Trade Commission. The decentralized blockchain network that cryptocurrencies are founded on has privacy-enhancing features that make it an ideal environment for laundering money and cybercrime.
Blockchain data modeling Chainalysis keeps track of the quantity of cryptocurrency ransomware payments. And over $692 million in coerced money was reported in the company’s 2022 report on extortion payments for 2020, nearly twice the amount reported in the earlier year.
According to data from Chainalysis, the amount of BTC laundered using decentralized finance (DeFi) protocols increased by $900 million or roughly 1,964%. He added that regulating cryptocurrencies would be advantageous even if cybercriminals didn’t use them.
In his conversation with The Financial Times, Gensler succinctly summarized the circumstance. With a global market worth approximately $2 trillion, he added, “it’s at the size and the kind that if it’s going to have any importance five and ten years from now, it’s going to be within a public policy framework.” “History shows you that things outside don’t survive very long. So, in the end, finance is all about trust.
The Industry Needs More Clear Regulation: Changpeng Zhao
Considering how the CEO of one of the largest cryptocurrency exchanges was caught in the crosshairs with FTX, he has been upfront about “cutting shortcuts.” As per reports, Changpeng Zhao requested new legislation for the industry that is stable and explicit in response to their customers.
In addition, Zhao also commented on how ‘we’re in an innovating sector, and we’ve seen things go crazy in the industry in the last week’ to a gathering of G20 leaders at the Bali summit.
In response to the closure of the rival exchange, his comments come for colleagues and partners in the crypto business outline initiatives. To back his speech, he added that regulations are necessary, as are good performance and a steady process.
Following the latest events, CZ took to Twitter to tweet how he thinks that the industry, as a whole, must safeguard everyone and the public. Consequently, it’s not only regulators. Zhao claims that while regulators have a role, they are not the only ones accountable.
Besides, his Tweets also indicated a request to fellow exchanges, as consumers withdrew money for a week until FTX filed for bankruptcy on Friday. As per the CEO, businesses should take Binance’s lead and stop accepting FTT deposits on their platform.
What Steps Will Crypto Regulation Take Next?
Clear regulations are still being developed, even though a growth in crypto adoption by the general public in 2021 sparked an ongoing discussion over the government’s role in this mostly unregulated industry.
The introduction of hundreds of cryptocurrencies and virtual currencies and the emergence of new businesses and platforms to assist in their storage and trading has left the sector in the dark.
Since the mainstream Populus hasn’t used Blockchain and cryptocurrency, policies on digital assets are yet to be developed. Therefore, it’s a complex undertaking, according to Greenberg. “I can see why people are delaying, but something needs to be done immediately.”
President In Action
Recent discussions on Capitol Hill indicates that the question is not when there will be more regulation but if. For example, President Biden approved the new crypto law about taxation late last year as part of the $1.2 trillion bipartisan infrastructure agreement. Additionally, the Federal Reserve is considering launching digital money for the United States.
In January, the Fed did long-awaited research about the advantages and disadvantages of a national digital currency available.
Ultimately, the report postponed making a final decision about whether to proceed. Instead, the Fed allows the community and other parties until May 20 to provide feedback before taking action. Another contentious subject is stablecoins, which many experts predict will be the first cryptocurrency to be subject to regulation.
Could New Regulations Add Some Stability?
Although new regulations may increase market stability, investing in cryptocurrencies is still quite risky and speculative. As a result, financial experts urge most investors to limit their cryptocurrency holdings to less than 5% of their total portfolios and never put money into cryptocurrency at the price of emergency savings or paying off a large debt.
The terminology used to describe the various operations, goods, and customers is not universally standardized, further complicating issues. For example, the phrase “crypto asset” describes a broad range of digital items secretly issued using comparable technology and can be held and exchanged primarily through online wallets and exchanges.
Role Of Domestic Authorities & Rapidly Changing Frameworks
Several domestic authorities with radically different frameworks and goals, including those for banking, commodities, securities, and payments, may simultaneously become interested in the actual or anticipated usage of crypto assets.
Some regulators prioritize consumer protection over safety, legality, or economic integrity. Additionally, various crypto players, like miners, validators, and protocol developers, are difficult for traditional financial regulation to address.
Therefore, the industry remains unpredictable even though new and updated regulations are continually being developed and followed. Considering how innovations have been a part of the industry, it’s more likely that organizations need to be more real-time with the market changes.
Cryptos = Trustworthy?
Like all previous financial systems, cryptocurrency infrastructure must be based on trust. Building confidence depends on having rules that ensure recipients’ identities are verified and that checks are made to stop money laundering and other forms of fraud.
The crypto sector is pushing for laws because it is aware of this. However, while these regulations focus a lot on AML and KYC, it’s hard to say whether the regulations would be enough.
What’s your take?