The blockchain technology industry saw many innovations in the past decade. With more sectors adopting blockchain in core business functions, experts predict that the technology will be the backbone of numerous industries in the years to come. Although many enterprises already utilize blockchain, many people recognize it because of cryptocurrencies.
First introduced in 2009, the crypto market is now one of the most popular investment methods worldwide. Since the inception of Bitcoin, there are now an estimated 8,500 virtual tokens available on hundreds of crypto exchanges. This gives individuals plenty of choices to invest in, which has boosted cryptocurrency to become the multi-trillion-dollar industry that it is today.
The total market value of crypto tokens in the last month of 2021 already reached almost $90 billion, which contributes to the total market cap of digital assets at more than $2 trillion. Industry advisors foresee that these numbers will continue to climb up moving forward with the growing popularity of NFTs, stable coins, and the crypto payment system.
The decentralized nature of virtual tokens is one of the prime reasons crypto has gained traction in recent years. Investors can deposit without much interference or disruptions. Also, it enables people to invest wherever they are with the use of smartphones or computers and a reliable internet connection to access their digital wallets.
However, the unregulated structure of the industry brings in numerous disadvantages for the crypto exchange and its clients. Criminals can use crypto exchanges for money laundering, and scammers can victimize countless people with their illicit schemes. These incidents pushed many administrative boards and politicians to establish regulations to combat fraudsters from exploiting the network.
Challenges in Crypto Regulation
Apart from the trillions in assets, the crypto industry's freedom from external pressure and crackdowns have made crypto trading enticing for cybercriminals. This is why many government agencies also want to oversee the industry to suppress swindlers from taking advantage of virtual assets. But it is not easy to form regulations, especially if the authorities are uncertain about the nature of the industry.
Authorities have conflicting statements about the classification of virtual coins in the current financial system. Crypto assets are developed to provide innovative ways to invest and perform financial transactions. Many officials have compared crypto with traditional currencies, believing it functions as traditional security. Yet, numerous analysts also think that digital currency is a new form of asset.
Despite this, government officials continually hold talks about how to best regulate the sector. This is designed to bring significant changes to the industry and ensure robust protection from people with criminal intentions.
Government Regulation is Just Around the Corner
The rising cases of fraud in the crypto industry are one of the reasons why government bodies are pressing for statutes that regulate the industry. The abuse that the industry experienced from hackers has led to financial losses that have already reached more than $7.5 billion worldwide, almost 81% higher than 2019.
Numerous states have already passed legislation that tackles the use of digital coins within their jurisdiction. But, most of this is about promoting the industry by exempting crypto trading from the state's securities regulations. At the national level, the establishment of guidelines has become a regular topic of congressional hearings, indicating that rules on virtual assets are on their way.
The Commodity Futures Trading Commission (CFTC) has also declared that they will continually police crypto exchanges while urging Congress to expand the commission's authority and resources. The CFTC has been aggressively enforcing the marketplace for virtual currency for years already. The agency advocates for a change in power and regulation because of the growing size of the market and how it affects investors in the long run.
Moreover, the Securities and Exchange Commission (SEC) is also sharing the responsibility of enforcing various marketplaces for digital assets. The SEC's chairman deemed the situation in the industry as "the Wild West" and assured crackdowns on bad actors. They also urged for "guardrails" in the industry that protect individual investors from potential market manipulation and other fraudulent activities.
Importance of the Regulations
With no central regulator to review the transactions in the market, crypto exchanges have been the ideal tool for criminals to use for money laundering. With regulations in place, authorities can keep track of investors' transactions and eliminate the anonymous nature of the industry. Furthermore, the volatility and manipulations of prices can be prevented by getting a clear rule about the complexity of the technology.
Additionally, having an established regulating body can make the crypto industry a less desirable target for cybercriminals. Investors can adequately secure their cryptocurrency digital wallets and reclaim losses with proper guidelines in place.
How Modern Online Security Can Help
Virtual coins can add an extra layer of security in the form of digital signature authentication. This is used by prompting the investor to confirm their transaction of crypto with biometric authentication to ensure that only the genuine owner can transact and move the asset.
Crypto markets can also integrate the latest cybersecurity trends such as biometrics, apart from digital signature and government regulations. Incorporating the use of biological data for identity verification and transaction confirmation purposes can give them a powerful tool against malicious actors.
Tougher Rules are Imminent
Governing bodies have been about the crypto regulation framework for years. But they have not been able to keep up with the industry's relentless growth over the past decade. Congress, CFTC, and SEC are already working to regulate the sector as soon as possible. Professional investors have even said they might welcome new regulations from the authorities, especially if they are not so stringent that they discourage investment.
How LoginID Can Help
Implementing security measures can also help regulators and crypto exchange lobbyists fend off fraud attacks. The use of biometric authentication for identity verification eliminates the need for traditional passwords, which are weak, and does not compromise the security of the investors.
LoginID’s FIDO2 passwordless authentication solution is highly secure, simple to integrate, and reduces onboarding friction. They were recently given a grant by Algorand to develop their authentication API on Algorand’s blockchain.
To learn how LoginID can secure digital wallets and crypto exchanges with the necessary fraud prevention and transaction confirmation tools, get started by registering for a free account.
Check out an interesting article about crypto we contributed to on Porch.com
Sources:https://sanctionscanner.com/blog/the-challenges-of-regulating-crypto-assets-324https://www.newyorker.com/business/currency/the-challenges-of-regulating-cryptocurrencyhttps://markets.businessinsider.com/news/currencies/cftc-crypto-regulator-rostin-benham-gary-gensler-sec-2021-10https://www.wsj.com/articles/cftc-chief-says-recent-crypto-cases-are-tip-of-the-iceberg-11635370374?mod=e2fbhttps://www.npr.org/2021/08/20/1029436872/tougher-rules-are-coming-for-bitcoin-and-other-cryptocurrencies-heres-what-to-knhttps://www.ndtv.com/business/5-reasons-why-cryptocurrency-regulation-is-important-2637741
