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By Shane Rodgers
The rise in popularity of digital currencies over the last decade has led to open dialogue and trading of opinions on regulation, but the fall of such crypto juggernauts as FTX has prompted a more nuanced and serious look at the need for regulation in the cryptocurrency space. Even the Securities and Exchange Commission (SEC) has called for tighter regulations on the heels of such well-publicized crypto powerhouse bankruptcy cases.Â
The crypto market seems to have weathered well-publicized upheaval in the second half of 2022, though this has not slowed the call for better oversight and regulation of digital currency. At the onset of 2023, the SEC began a crackdown of sorts on the space, issuing 24 enforcement actions in an unprecedented move. Some crypto enthusiasts have been slow to embrace the call for regulatory oversight, while others are embracing the need for regulations that could legitimize the digital currency space overall.
The need for regulationÂ
The fall of FTX and other well-known crypto organizations has proven to the world that the industry can be fallible. While fraud and market manipulation have caused some investors to balk at the idea of adding cryptocurrencies to their portfolios, institutional investors are rapidly, but selectively, warming to the space —- wary but with a relatively positive outlook. Commercial investors, on the other hand, have been slower to adapt, timid about the possibilities of what crypto adoption could mean for their businesses.Â
The SEC has been pushing to open the lines of communication for investors who were unaware of nefarious crypto company operations until it was too late. The kind of open and transparent communication that could have prevented fraud cases such as FTX from happening has been a primary concern of the pro-regulation set. While the push for regulations by the SEC stands to change the crypto space forever, it would be seen as a welcomed and needed change by many investors.Â
Those in the crypto market have largely complied with the SEC as they push for better regulation. Many investors have become more risk-averse as problems within the market have become more known and reached a fever pitch in 2022. This risk aversion among investors has led some crypto issuers to attempt to meet the needs of varied customers, offering “safe haven” tokenized stores linked to real-world assets to help investors minimize risk while allowing them to acquire, hold, and transfer digital tokens with an intrinsic value. This move not only helps traditional investors who may be hesitant to enter the crypto space but also speaks to the market’s ability to bend to the will of regulatory bodies.
Regulation can help investorsÂ
With the emergence of Bitcoin’s ETF approval in January of 2024, the crypto market shows signs of being on a historic comeback. Excitement over the historic approval has allowed even the most traditional investors to consider cryptocurrency as a portfolio option. Many people agree that guidelines from the federal government can help the crypto market grow and thrive.Â
Regulation can help companies as well, as organizations can more easily scale their platforms and grow within the crypto space under a set of clear, transparent guidelines. As a result, many companies that initially shied away from the market due to problems with crypto may reconsider entering the space.Â
Blockchain can be incredibly reliable and secure, and regulation can help crypto experts use blockchain to weed out fraudsters and other bad actors. Cryptocurrency is still a highly traceable currency through the blockchain, leaving it prime for effective oversight.
Crypto regulation can also give companies a new avenue for raising capital. Under heightened scrutiny and regulation, ventures can be compelled to secure funding through traditional means. This pathway typically involves seeking capital through conventional debt instruments or equity offerings, such as private placements facilitated by a corporate entity. Another avenue is registered token sales, which remain viable despite increased oversight from regulatory agencies like the SEC.Â
Regulation helps market stability
The crypto space is rapidly expanding and shifting. With each novel idea that comes out of the crypto space, the call for regulatory oversight increases.Â
Governments and regulatory bodies have grappled with how to reign in what has been considered the “Wild Child” of finance, but it is clear that innovation needs to be properly balanced with the protection of investors and market stability. While regulations could introduce new challenges to crypto projects, they also provide an opportunity to legitimize the industry and build greater trust among investors of all kinds.Â
As the crypto market matures, investors must keep an eye on regulatory changes and developments not only because they will need to be compliant with laws but also because it will keep them informed about the crypto market as a whole. This allows investors to move forward without overwhelming anxiety about possibly entering an unregulated space.Â
The full potential of cryptocurrency could easily be revealed under a set of regulations. The market could expect greater adoption and trust to follow a comprehensive set of guidelines and guardrails for the market. It is not something to fear, but rather is a natural progression of a market that is gaining more momentum and legitimacy in the modern financial space.Â
Author Bio
Shane Rodgers is Co-Founder, Chairman, Chief Executive Officer, and Managing Member of PDX Global LLC. He has more than 30 years of experience in investment banking, corporate finance, management, and operations in Australia and the United States. Mr. Rodgers served in a wide variety of positions, including as Co-founder and Chairman and CEO of Anglo Arabian Corporation Ltd., an unlisted Australian public investment company from 1980 to 1985; A director at Satco Power Corporation, which he helped take public from 1985 to 1987 Chairman and CEO of the Chancellor Group, Inc., a publicly-traded US oil & gas company, from 1997 to 2001; as a partner and Chairman of Capital General Partners, an Australian boutique corporate advisory firm from 1996 to 1998, and as a Partner in KKR Associates, an Australian investment partnership (unrelated to Kohlberg Kravis Roberts & Co.), from 1993 to 1995.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.