The numerous cases of investors losing their investments as a result of the sudden crash of the crypto projects they have invested in, have caused the Britain Treasury to formulate new laws to guide how various crypto projects would come into existence and how to legally exit for any reason. Earlier in April, the Treasury announced its plans to bring all stablecoins under the regulation which will cause them to be considered as securities pegged to the US dollar.
This was caused by the de-pegging of the popular crypto TerraUSD. With this law put in place, the founders of such crypto projects will be liable to pay back investors should the project crash in the future. Can Britain succeed in this regard? Is it justifiable for the Treasury to pass such laws to regulate crypto? This work has examined these pressing questions about crypto regulation in Britain today.
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What does it mean to regulate crypto?
The large amount of capital invested into crypto has drawn the attention of the regulatory authorities in the crypto industry. Many countries now consider it necessary to formulate laws that will govern the activities carried out in the crypto market today.
Regulating crypto simply means monitoring the activities going on in the crypto industry to ensure that various crypto projects conform with the regulatory standards. Many crypto traders today would kick against this as going contrary to the purpose of cryptocurrency which was created to serve as a decentralized means of payment.
Why is Britain eager to regulate crypto today?
The increasing rate at which investors lose funds resulting from sudden crash of different crypto projects has raised serious concerns among the different countries’ regulatory authorities, to consider possible ways of sanitizing the market and protecting investors’ funds. The recent crash of the FTX exchange which saw investors lose more than $6 billion invested with the exchange after they filed for bankruptcy protection under US laws, has caused Britain to expedite the process of formulating new laws to regulate the crypto industry.
At present Britain is concluding plans to disclose the new laws designed by the Treasury to regulate the crypto industry within the country. This new law is expected to give the Financial Conduct Authority (FCA) more powers to monitor the activities of the crypto industry. They are to further monitor how large crypto firms shut down without repaying investors’ deposits. These laws have been considered necessary to ensure that traders do not suffer more losses from more crypto exchanges shutting down in the future.
Is there any justification for the decision to regulate crypto today?
Given the increasing cases of crashed crypto projects that have resulted in investors losing their funds in the market, some country’s regulatory bodies now consider it pertinent to extend their watch over the market, to protect the investor’s capital against unexpected crash of the projects they invest in. Many tend to criticize this as not enough reason for the regulator to interfere in the market today.
Another important reason why regulators are seeking to interfere in the market today is to help sanitize the market from the rising incidence of crypto frauds.
Advantages of regulating Crypto
- Helps to protect the investor’s deposit with the exchange.
- Ensures that only good crypto projects are approved.
- Helps in restoring order in the market and to fight crypto frauds.
- Gives investors more confidence in dealing with centralized exchanges.
Disadvantages of regulating Crypto
- Goes against the purpose of cryptocurrency designed to be decentralized.
- Makes the identity verification process mandatory before trading
- This could result in increased taxation
