Crypto Price Drops Due to Vague Regulatory Frameworks
While this year may have started out on a really good note for cryptocurrencies, with most of the cryptos registering record highs, things are not so good for the industry right now. Since late January, cryptocurrencies across the world have been taking a beating. And while there have been a number of factors influencing the decline of the digital assets, none has had a greater impact than the lack of clarity in regulatory frameworks with regard to the industry in almost countries.
Asian Influence on Regulations
Asia has some of the largest cryptocurrency exchanges in the world such as Binance, Upbit, Huobi, Bithumb, bitFlyer, OKEx, etc. The world’ biggest Bitcoin exchange is in Hong Kong and accounts for more than 10% of the world’s trade in the cryptocurrency. Asian countries are also the biggest traders in cryptocurrencies, making this region the market maker for the industry.
Thus, regulations in this region would have a ripple effect across the world. What is happening in Japan right now is a prime example. In the aftermath of the massive hack attack on the Japanese crypto-exchange Coincheck, the Japanese regulatory authority, the Financial Services Agency, has cracked down on all cryptocurrency exchanges in a bid to ensure security at these exchanges is strong enough to prevent another such heist from taking place.
The result of this is a slowing down on of one of the most important crypto markets in the world while exchanges scramble to meet the requirements of the FSA.
China, which used to be the biggest hub for cryptocurrency mining and trading, has seen its government do a 180 degree turnaround in its attitude towards cryptos. The Chinese government is doing all it can to wipe out all things crypto in the country, which could have devastating consequences for the industry as a whole.
Korea’s blow-hot-blow-cold attitude is also impacting the cryptocurrency industry. With some of the biggest markets in the country, the governments see-sawing with regard to how cryptocurrencies are to be handled are affecting the industry.
Overall Hands-Off Attitude of Governments
While the Asian authorities are either cracking down on cryptos or encouraging them, depending on the situations, other governments around the world are taking a more hands-off, wait-and-watch approach. While this attitude worked well in the beginning, giving traders the chance to speculate without restrictions, it is now hurting the growth of the industry.
For the cryptocurrency industry to take its next step, it needs to attract more stable investors who are looking at growing the industry. But the serious investors are put off by the extreme volatility of the market due to a lack of strong regulations such as there are in the traditional financial markets.
Right now, the cryptocurrency world is deeply divided on how the industry should grow and how much of a role the government should play in its development. The point is, the government needs to play a role in the development of the industry and create strong and fair regulations for the cryptocurrency market to help it grow.