After being in turmoil for many years, virtual currency legislation has begun to gather major traction worldwide. These results demonstrate that virtual currencies are not simply here to stay but are also on their way to becoming a part of the global economic system.
The significance of these advancements from the standpoint of an innovator is that with legislation comes massive implementation and financing into initially open markets, as stakeholders (both general merchandise and sizable finance companies) have the security of knowing that financial regulatory agencies are scrutinizing the behavior of the financial services providers that offer publicity to this asset class.
The banking industry would have the greatest influence on the market, as they would open the crypto marketplace to masses of their clients through their existing systems and financial products.
Regulations in Different Nations
Many nations have implemented their own regulatory standards regarding cryptocurrency:
United States of America
Early this year, President Biden issued an executive order titled ‘Ensuring Sustainable Development of Virtual Assets.’ Following that declaration, various projects were launched in the United States. Senators Lummis and Gillibrand have introduced a balanced proposal to Congress to establish a framework for virtual currency governance in the USA, as well as the FSOC (a regulating council of leading financial supervisors) has recommended that Congress approve regulations addressing concerns in the crypto field.
The FSCA ruled in October that virtual currencies would be classified and governed as financial assets. Furthermore, the statement was issued on October 19th and went into force instantly. The FSCA’s purpose is to reduce consumer risk in virtual currency investments, which they regard as a requirement given the increased accessibility of digital assets in the domestic market and increasing demand for virtual currencies from South African consumers.
This year, the European Union approved preliminary legislation that could result in cryptocurrency restrictions in the area. The measure, known as MiCA (Markets in Crypto Assets Regulation), means that a regulatory framework for cryptocurrency wallets and marketplaces in Europe should be created. The legislation is likely to be officially approved by the European Government in 2023 and put into effect in 2024.
In October 2022, the House of Commons voted to regulate virtual currencies similarly to other types of financial securities, bringing them under UK regulation. However, the legislation must still be approved by the House of Lords.
The Emirate of Dubai passed a law governing digital assets in February of this year. Moreover, the nation’s ambition is to establish itself as one of the world’s top regions for digital assets and virtual currencies.
Impact on Financial Performance
In our opinion, a universally regulated marketplace should boost investor participation and investment class performance in two ways:
Firstly, a safe and secure market environment is expected to make stakeholders feel more at ease. Regulations could very well minimize the grey areas in which corrupt individuals can act, and monitoring of marketplaces and financial institutions could ensure that they are subjected to the same standards as the remainder of the banking sector, culminating in investors who were initially skeptical of the sector investing.
Second, regulations allow conventional financial institutions to participate in the market, including banks, providers of payment services, and institutional investors. These organizations manage billions of dollars and billions of customers.
Utilizing current bank systems, banks should soon be able to provide their consumers a route to participating in crypto. These advancements are already taking place at firms such as Goldman Sachs as well as Barclays, which already provide these services to their customers. While Mastercard is developing programs to enable banks to offer Bitcoin trading to their customers, VISA has been offering crypto payment solutions for over a year.
The Bottom Line
The implementation of regulations over cryptocurrency should make a massive difference to the financial performance of the sector. Regulations should allow individuals to feel much safer entering the space as the chances of being scammed or losing all their money should be greatly reduced. However, many other people enjoy cryptocurrency because of its decentralized nature. What does this mean to them? We’ll have to wait and see what the future holds.
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