All about Crypto & Blockchain

The Challenges of Regulating Cryptocurrency

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There is no denying that cryptocurrency has become a major force in the world of finances. However, this is still a relatively new concept. Authorities all over the world are challenging the nature of cryptocurrencies and are trying to figure out a way to regulate it. However, there are many challenges of regulating cryptocurrency that need to be dealt with:

1. Classification

Classifying the existing cryptocurrencies is still among the biggest challenges regulators face. Digital technology advancement is one of the main reasons behind the emergence of crypto assets. Through this, people have a whole new way of investing, transacting, and bartering. Because of the rapid innovation, it is difficult for the regulators to follow an approach. There are some analysts who believe that cryptocurrencies are a new asset class. This might be correct for tokens functioning like securities.

2. Over-regulation

Over-regulation of cryptocurrencies might undermine the innovation, which will prevent this sector from growing. Thanks to the rapid increase in assets’ value, the fundraising abilities have been democratized radically. This is why crypto assets need regulations that allow small companies that are strapped for cash to raise funds.

3. Blockchain revolution

Blockchain is another issue regulators have to deal with. Blockchain technology supports cryptocurrencies and has been responsible for revolutionizing some aspects of the finance and banking industries. With blockchain, a replication of encrypted ledger data is guaranteed. These distributed ledgers can be used for facilitating public functions like healthcare services and identity management. Regulators have to take this into account as well.

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