Why Cryptocurrencies Require Regulation

Cryptocurrencies are digital assets without intrinsic value, driven by dicey frenzy.

The Indian new crypto bills plan to prohibit private cryptos while forming a facilitative framework for CBDC adoption. The law might classify mining, holding, generating, and selling private digital coins as a crime. Reports indicate that the authorities might introduce stiffer regulations. That can mean adhering to the 2021 FATF guidance for crypto held as an asset by imposing tax gains from the currencies, strict disclosure standards, and investment ceilings.

Understanding the Enthusiasm

The global crypto market has seen rapid growth with support from many trading platforms, mostly application-based. They attract investors when the conventional investment opportunities, debt, and stocks generate the lowest yields. Furthermore, cryptocurrencies promise higher returns. In 2021 November, the global crypto market, comprising over 6,000 digital tokens, hit a market cap of $3 billion.

India has seen crypto trading platforms’ outbreaks over the last year. Latest industry data show that crypto holdings of about 20 million investors total at around 400 billion rupees, showing the nation emerging as leading VASPs (Virtual Asset Service Providers), and dealing in digital coins. What accounts for such sudden Enthusiasm?

A reasonable reason is that the community considers cryptocurrencies as speculative products. For instance, there is no cash flow from the asset and turnover with limited-supply products. The asset’s value appreciation or capital gain remains the only cash flow in the future.

Digital Assets in limited supply tend to surge in value with increased demand. During low yields, money flowing to these speculative builds market buzz, attracting followers amid FOMO. Recently, Raghuram Rajan confidently told CNBC that digital coins boast value since fools are willing to purchase them.

With such remarks, financial experts warn individuals in interacting with the ‘speculative assets.’ They want the government to consider speculative enthusiasms. It seems like most crypto regulation advocates consider volatility and security.

For now, financial enthusiast seems to call for stiffer regulations by the authorities. Some individuals appear ready for crypto prohibition. However, analysts believe India will not ban digital coins. It will regulate the crypto marketplace instead.

Do you think that the crypto market requires tight rules from the authorities? You can comment below.

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