AEI Says Blockchain’s Transparency Aids Self-Regulation For Crypto Exchanges
A think tank from the United States, the American Enterprise Institute (AEI) has given its view on the crypto regulation debate. In an article that has been published on Monday, the AEI suggests that rather than regulating crypto exchanges, it may be better for users if the effort is focused on research into how these crypto enterprises operate. Regulation could be implemented once that self-governance methods fail and evidence about it is provided.
Of course, the AEI believes that as the volatility in the market continues, users will be asking themselves whether they can trust these assets or not. At the same time, users want to be sure that the markets are not influenced by manipulation from wealthy actors.
The AEI explains:
“It bears remembering that the institutional arrangements under which fiat currencies are created and traded are far from perfect. Regulations seldom come with guarantees improved performance. While good regulations are welcomed, bad regulations at best do no harm.”
The Institute says that regulations imposed by governments are some of the forces that discipline financial markets. The AEI mentions the early share markets back in the 18th century. Self-governance was more effective than state intervention in identifying and correcting imperfections.
Furthermore, cryptocurrencies are more transparent at the time of processing transactions. All of them are registered on the blockchain and can be tracked in case it is needed. ‘Consequently, it is feasible to trace all transactions into and out of publicly identified addresses,” stated the AEI.
“In fiat currency, this would be the equivalent of being able to trace every transaction involving every coin or banknote issued and every dollar of debt raised under fractional reserve agreements.”
Back in June, John Griffin, a finance professor at the University of Texas, wrote an article explaining that Bitcoin and its price have been manipulated with the Tether (USDT) virtual currency. Each time Bitcoin experienced a drop in its price, Tether were printed and used to buy BTC, which means that bear markets were less harmful.
There are some countries with self-regulatory authorities that are helping the market be more attractive for investors and avoid scams and fraudulent activities to take place. For example, Japan has a self-regulatory body that started operating back in April this year, and is conformed by several crypto exchanges.
The agency is working side by side with the Japanese financial watchdog, the Financial Services Agency. This regulatory body helps the market have better standards for trader safety.
In Croatia, another self-regulating body is trying to reduce the lack of uncertainty in the cryptocurrency market. Virtual currency activities can be legitimized by these entities if they clean the space from bad actors.
Regulatory agencies all over the world are trying to create legal frameworks for investors to have clear rules and be protected against scams and other frauds.