Cryptocurrency regulation is a complex and divisive topic. Some view it as necessary to maintain order and make the industry more accessible to traditional financial institutions, while others believe it would stifle innovation and damage the fledgling ecosystem.
Ultimately, on-going research into effective regulatory models for cryptocurrencies is needed to ensure that capital markets, exchanges, miners, traders, and users can continue to benefit from the emerging asset class.
To reap these benefits, regulations should encourage transparency and promote responsible practices without reducing liquidity or inhibiting fair competition. As cryptocurrency use continues to evolve alongside regulations, an equitable balance must be found with careful deliberation so that the potential of blockchain technology can be realised in the long run.
Why is cryptocurrency licensing important?
Cryptocurrency licensing is essential for countries to create a balanced and secure environment for the use of digital currency. A license serves as evidence that the company applies specific anti-fraud measures such as customer due diligence or KYC (Know Your Customer) checks, discloses its activities, abides by all applicable regulatory requirements, acts in good faith and carries professional indemnity insurance.
The increasing popularity and usage of the cryptocurrency called for clear regulations to protect consumers, safeguard financial stability and ensure credibility and compliance standards are met. Cryptocurrency licenses provide assurance that innovative payment solutions will not be misused or exploited. As this trend continues to grow into an accepted payment alternative, companies offering these services must comply with stringent laws to legitimise their use.
The regulation of cryptocurrencies has been tried to be addressed on multiple occasions by numerous countries. However, few countries have dared to regulate this type of asset because they do not have in-depth knowledge about it.
Binance is an excellent example of a company that complies with all regulatory obligations to avoid problems, becoming the largest exchange in the world. However, some users miss the ability to buy cryptocurrencies without KYC verification, as it maintains the spirit of anonymity that has been attached to cryptocurrencies for a long time.
One of the main problems has been the recent fall of several projects within the sector since it has caused a drop in confidence in cryptocurrencies. In addition, this has given reason to users who want a more regulated sector, especially when protecting users who invest their money in this platform.
Elimination of banking obstacles
Cryptocurrencies are a great asset so that people can carry out all kinds of transactions without an intermediary. New technologies mean that most users can access platforms like Binance to send and receive money with just a few clicks. Additionally, transactions often have lower fees than banks, which often take several days to complete international transfers.
Instead, transactions are authenticated by people who validate each block on the blockchain. These people work out complicated algorithms so that transactions have a unique number, and there is no way to trace the money.
This is useful if used to the best of its ability, although some exchanges have yet to provide beneficial services due to the hefty fees charged.
Cryptocurrency licenses would not convince a large group of people since there would be more control over their own cryptocurrencies. However, Binance already uses the same model as any other regulated organisation. This means that a centralised structure connects buyers and sellers with market makers that provide liquidity and charge traders for transactions.
Alternative cryptocurrency exchanges
Several projects seek to create exchanges without control of the identity of the users. For example, some people use tokens like UNI to send low-fee transactions anonymously. Privacy is increasingly cared for by cryptocurrency users, and regulation would not allow them to enjoy the advantages offered by alternative platforms and cryptocurrencies.
In the case of Uniswap, this helps users maintain control over what happens to their funds. It remains to be seen whether this becomes a viable alternative for the future that might be made up of regulated and unregulated companies. However, many people want to keep the platforms from being regulated, as this would lead to higher costs for users.