Cryptocurrency Regulations, by all means, 2021 has been the biggest of years for all cryptocurrencies.
We have seen record prices for Bitcoin and other currencies like Ether and also renewed interest by the Biden government and financial institutions to come to terms with digital currencies.
The public’s interest in cryptocurrencies has been unprecedented but the fledgling industry has witnessed huge price fluctuations that make it difficult to predict where it is headed in the long term.
With interest in cryptocurrencies snowballing, it has become all the more important for nations to come to a consensus regarding its regulation.
Regulation of Cryptocurrency
We can expect a continued dialog regarding the regulations of cryptocurrencies. Regulators worldwide are trying to get a grip on making laws that will make them safer for investors, not destabilize existing financial systems, and deter cybercriminals.
Even though regulating it seems to be on every government’s agenda, there seems to be little agreement on how to enforce it.
According to Bitcoin Noticias, Federal Reserve Chair Jerome Powell says he does not intend to ban cryptocurrency in America, but Gary Gensler, Chairman, Security and Exchange Commission, has consistently pointed out that cryptocurrencies need to be regulated to protect investors.
According to Gensler, investors were likely to suffer if stricter regulation was not put in place.
The IRS too is obviously interested in laying down reporting standards of virtual currency transactions for people to follow in their tax returns.
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While it is clear the Biden government would prefer to regulate cryptocurrency, China has declared cryptocurrency transactions to be illegal in the country. Indian regulators are expected to announce guidelines soon.
Impact of Cryptocurrency Regulation on Investors
At this point, American companies and investors are operating in the cryptocurrency space without any clear guidelines.
Formulation of rules and regulations would lead to the all-around development of the cryptocurrency industry, according to Time.
The IRS now will find it easier to track cryptocurrency transactions by Americans.
It is, therefore, important for investors to record their profits and gains on cryptocurrencies to comply with the new legislation approved by the president in November.
With exchanges having to issue 1099-B tax forms to investors, the burden of crypto tax filing will also reduce significantly.
The cryptocurrency market is already volatile, and, likely, regulatory announcements will further have an impact that may not be in the immediate interests of investors who may have entered the market at high prices.
Many experts recommend retail investors restrict their cryptocurrency investment to five percent of their portfolios.
Even within that limit, their exposure should only be for an amount they can afford to lose without compromising their financial security.
However, if there is one thing experts from all over the world agree on is that the introduction of regulation in the cryptocurrency sector is beneficial.
By introducing sensible regulation, both government and investors will benefit. It will give investors more confidence, but it is unlikely that all the necessary regulations will be in place soon, even as governments try to do it right the first time.