How Regulations Make Crypto Better? A Full Take

With the promise of decentralization and freedom from traditional gatekeepers, crypto attracted millions of enthusiasts. But along with that freedom comes chaos: fraud, price manipulation, and extreme volatility have plagued the industry, making many investors wary. That's why crypto regulation is important.

Now, as policymakers, exchanges, and academics study the field more carefully, a growing body of research suggests that regulation is not the enemy of crypto but one of its most important allies. 

Rather than stifling innovation, thoughtful crypto regulation may be the key to building fairer, safer, and more efficient markets.

Regulation Brings Efficiency to Crypto Markets

A recent academic study shines new light on this issue, showing that regulation can make crypto markets significantly more efficient. 

Researchers compared different types of cryptocurrency offerings, from unregulated initial coin offerings (ICOs) to initial exchange offerings (IEOs), which are screened and managed by exchanges. 

The results were clear: unregulated ICOs were the least efficient, while IEOs, which impose standards and rules, approached the efficiency seen in traditional stock markets.

Efficiency in financial markets means that prices reflect all available information fairly, so future prices become less predictable to any single trader with insider knowledge. 

This kind of level playing field is good for all investors, big and small. Without it, prices can be easily manipulated, and ordinary investors may find themselves at a severe disadvantage.

Read also: New Bitcoin Regulation in Japan: Slash Taxes and ETF Ban Revoke

How Exchanges Provide Crypto Regulation

Interestingly, much of the crypto regulation seen today does not come from governments but from the exchanges themselves. 

Platforms like Binance and others have introduced voluntary standards for listing coins, requiring basic disclosures about projects and ensuring that some minimum level of investor information is available.

These exchange-based regulations are not laws enforced by governments. Instead, they are industry-led guidelines designed to make markets safer and more transparent. 

By setting minimum standards, exchanges help protect their users from fraudulent or dangerously opaque projects. This approach can serve as a model for policymakers considering how best to support the crypto industry without stifling its growth.

Read also: Japan’s Crypto Reform: Flat Tax, ETFs, and a New Investment Era

Protecting Investors Through Better Information

One of the core benefits of regulation in any financial market is the requirement for reliable public information. 

When companies or tokens are forced to reveal details about their operations, finances, and goals, investors can make more informed decisions. This transparency reduces the risk of price manipulation and fraud.

Liangfei Qiu, a business professor at the University of Florida and one of the authors of the new study, points out that investors who choose unregulated coins face a higher chance of falling victim to manipulation or being left without crucial information. 

By contrast, coins listed on regulated or self-regulating exchanges usually come with vetted information that helps investors understand what they are buying.

Read also: Is the Vietnam Crypto Policy Finally in Place? Regulation Update

Lessons from Traditional Finance

The study compared cryptocurrency markets with traditional stock exchanges, which are heavily regulated. Stock markets require public companies to follow strict rules about transparency and fair trading. 

While crypto is fundamentally different in many ways, the basic principle holds: markets work better when participants have access to the same information.

Qiu’s research team used variance ratios, a standard measure in financial economics, to assess how predictable asset prices were. In an efficient market, prices are essentially unpredictable because they already include all available information. 

Markets with insider advantages or hidden details, by contrast, tend to show patterns that can be exploited by those in the know, to the detriment of everyone else.

Read also: Senate’s Stablecoin Regulation Bill Advances to Final Vote After 68-30 Procedural Approval

Why Policymakers Care About Crypto Regulation

Governments worldwide are paying closer attention to cryptocurrency. Policymakers see the risks of unregulated markets, from fraud to money laundering to systemic instability. But they also recognize the potential benefits of crypto technology, from financial inclusion to innovation in payments and contracts.

The research suggests that striking the right balance is possible. By setting clear, reasonable rules, lawmakers can promote a healthier crypto ecosystem that attracts both individual and institutional investors. 

Such regulation can support innovation while protecting participants from the worst excesses of a free-for-all market.

Read also: Can the New CTC Chairman Make the Market Positive?

Conclusion

Regulation and crypto regulation are not about killing the spirit of decentralization or freedom that gave rise to cryptocurrency. Instead, they are about making sure these markets can thrive in a fair and transparent way. 

By improving market efficiency, protecting investors through better information, and setting minimum standards, regulation supports a healthier, more sustainable crypto economy. 

For anyone who wants to see crypto mature into a trusted part of global finance, thoughtful regulation is not an obstacle but an essential step forward.

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FAQ

What is the regulation of cryptocurrency? 

Cryptocurrency regulation consists of the legal rules and guidelines created by governments to control how digital assets like virtual currency operate. These rules are different from one country to another.

What is the ISO regulation for crypto? 

The ISO 20022 standard will provide regulators with more detailed transaction information. This will likely lead to stricter rules for crypto exchanges regarding anti-money laundering (AML) and knowing their customers (KYC), as well as increased monitoring and disclosure for cross-border crypto payments.

What are the IRS rules for crypto? 

The IRS requires you to report any income, gain, or loss from all taxable virtual currency transactions on your federal income tax return for that year. You must do this regardless of the amount or whether you receive an official statement.

What is the crypto regulation bill? 

This legislation would specify when a crypto asset is considered a commodity or a security. It would also allow crypto exchanges to register with the Commodity Futures Trading Commission and would reduce the Securities and Exchange Commission's control over digital assets.

Should crypto be regulated? 

Yes, regulation is seen as a good thing for crypto. It can offer better protection for investors, help prevent illegal activities, and encourage more people to use digital assets.