Cryptocurrency adoption is the best outcome for investors, as it would add more safety around the investment sector and could help developers push for Web3 implementation. However, governments are skeptical about regulating these digital assets because they come with various risks for the financial market.
Crypto and blockchain still need more improvement to be considered safe by official bodies. They can be volatile and unstable for now, providing no reassurance for recovery or protecting user data. Due to extreme volatility, the Bitcoin price today can differ considerably from yesterday’s, and investors who were unfortunate enough to buy or sell Bitcoin during this period might never be able to recover their portfolio investments.
In addition, the sector is constantly changing, with new technologies replacing old ones. While the dynamic environment seems the perfect space for newbies, it can also attract many human errors and affect blockchain users.
Therefore, governments of considerable world powers are trying to pursue some regulation. The U.S. House of Representatives is one of the first to introduce the FIT 21 Act recently. Let’s see what it’s about.
FIT 21 responds to the need to regulate the crypto industry as soon as possible, considering the increasing number of Americans who know about crypto. According to Statista, the country is a leader in terms of revenue from the crypto market, and experts believe it’ll follow a surging dynamic.
Hence, the government worked on FIT 21, the proposal whose contribution included crypto users, legislators, and financial institutions, all working on providing a clearer outline on crypto. The act categorizes cryptocurrencies into digital commodities, restricted digital assets, and payment stablecoins. It designates the legal authority on digital commodities and their users to the U.S. Securities and Exchange Commission.
When it comes to restricted digital assets, FIT 21 assesses them as securities, and the SEC will also overlook them, only more strictly. Therefore, associated market partners will have to be careful of the SEC’s reporting and disclosure requirements.
Due to its newness, crypto legislation typically lacks a thorough view of the industry. Everyone looks forward to further legislation developments, and we’re sure of the current challenges of introducing these digital assets into the traditional financial environment.
The FIT 21 is not far from this premise, as it has some vulnerabilities. For instance, it imposes that the SEC has a short deadline to respond to certification requests, which is unfeasible considering its usual disregard for timeframes. In the process with Ripple, the SEC has been extending all the deadlines for decisions multiple times, lengthening the appeal ruling for more than necessary.
In addition, the bill doesn’t clarify numerous details about how the SEC and the Commodity Futures Trading Commission (CFTC) will agree on definitions and limits, which might lead to rising problems establishing a stable jurisdiction framework. It might be difficult to agree that cryptocurrency is both a commodity and a restricted digital asset.
Cryptocurrencies will be difficult to fall into our world’s strict financial regulations. Their underlying design was established so they’d be free from governmental control, making them appealing to unbanked people, for example. However, as crypto evolves and becomes more accessible to acquire and use, we can see how regulation is needed to make it safe and promising in the long term.
Some fear that crypto regulation might put an end to what makes it profitable ―including price surges that add significant value to people’s portfolios. However, a legal framework would increase transparency and discourage market manipulation, which is prominent despite the blockchain’s nature of decentralization.
In addition, regulations are needed for worldwide companies to offer crypto-based services and products to the rising customer audience. Few businesses currently accept crypto payments since there is no settled regulation on financial aspects like taxation.
Waiting for governments and financial bodies to regulate crypto is difficult since we know there’s so much to do before adoption becomes global. While some are optimistic about the future, others are giving up on cryptocurrencies and turning to regulated digital assets.
From an investor’s perspective, the best thing to do is hold onto assets and allow them to increase portfolio value. The strategy is called hold on for dear life (HODL) and implies people do less buying and selling and more holding, especially during unsteady market movements. In addition, this method helps people gain more cryptocurrencies over time so they can act as savings accounts for the future.
It’s always best to be up-to-date with the latest crypto news, considering how fast things change in the industry. Not only are prices volatile, but also projects that flop or succeed, developers who create new applications, and companies that establish collaborations with centralized brands.
For now, Bitcoin is considered the safest cryptocurrency since it has proven stable and profitable over a few years. In addition, the SEC agreed that it is a commodity, and the IRS classified it as something similar to property. Therefore, Bitcoin is susceptible to taxation in the same manner.
Even the SEC recognized Bitcoin as a reliable asset, so we can say this propels it closer to worldwide adoption. Therefore, in the near future, Bitcoin might become legal tender in countries beyond El Salvador and become the greatest financial support for the unbanked.
Considering the high number of Americans who know about and use cryptocurrencies like Bitcoin, the government is slowly moving towards regulating it. This is the case with the FIT 21 bill (Financial Innovation and Technology for the 21st Century Act), which highlights digital commodities, restricted digital assets, and stablecoins. The regulation has included various crypto stakeholders, industry participants, as well as the U.S. Securities and Exchange Commission. FIT 21 is an important step forward in supervising crypto usage and protecting users worldwide.
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