- Importance of changing the current regulatory framework in place over the crypto market.
- GAO is leading the fight toward a change in cryptocurrency regulation.
The cryptocurrency market is constantly rising, with newer innovations being planned almost daily. But this rapid progression of the crypto market is hurdled by the undefined regulations in the crypto space. Due to the gap in regulations across the crypto domain, cryptocurrencies are difficult to get mass adoption. Therefore, the United States Government Accountability Office (GAO) has started raising concerns regarding the lack of regulatory decisions. Most prices, crypto projects, and exchange crashes are linked to regulatory conundrums. When a well-defined regulatory framework is implemented, the users in the crypto space will start losing less money. A stable financial platform will be established for people to conduct their trades without considering the backdrop in funds.
Findings of GAO’s Research on Crypto Regulations
Blockchain technology is known for establishing a decentralised network that isn’t controlled by a central authority. This means users can enjoy more power than central banks or financial institutions. Thus, the popularity of blockchain technology-related products has also gained quite a traction in today’s market.
But on conducting extensive research, GAO has discovered that many of those benefits haven’t been fulfilled. Instead, those products pose a greater challenge to the overall stability of the crypto market and the investors present within. One of the recent examples is the sudden demise of FTX.
When further research was conducted on their operations, most of the assets and funds were missing from the platform. Hence, if stronger regulations were implemented, such situations wouldn’t have unfolded. Furthermore, one of the biggest regulation gaps has been found in stablecoins which are said to be backed by a reserve asset.
However, there is no hard evidence behind the stability of stablecoins which are still vulnerable to perceive third-party risk. In addition, if those stablecoins fail after getting integrated into the financial system, then, the damage could be even more threatening than people could imagine.
Why Did GAO Decided to Study the Crypto Regulatory Framework?
Although the crypto market has continued to break all expectations by reaching a multi-trillion-dollar market this year. The controversies surrounding its products haven’t slowed down, as multiple instances of volatility and bankruptcies have continued to take place. Therefore, to address those gaps, the financial regulatory framework of cryptocurrencies needs a massive improvement.
Thus, GAO has taken that responsibility over its head by choosing to study the regulations with its incredible team. In their reports, GAO showed the importance of having a regulatory framework that could change the crypto market for good. Only through a certain tweak in regulations, could the crypto space products receive a huge boost.
Conclusion
It is a humble request by GAO to all major US financial regulators to come together and change the regulations. If a coordinated effort is given to improve the regulations of the cryptocurrency market, then it might achieve its long-term target. The ultimate goal of cryptocurrencies is to get mass adoption to showcase their efficiency.
