Inevitable Crypto Regulations for 2024 and Beyond

The rise of cryptocurrency has provided access to a digitized financial system free from government control. Store-of-value assets like Bitcoin revolutionized the investment market and allowed investors to diversify their portfolios with the latest technology projects based on crypto, as Ethereum, Cardano or Polkadot followed the course of Bitcoin.

As innovative as they are, cryptocurrencies are not easy to launch in the real world because they do not fit the actual regulatory framework. This is why it is still not so easy to buy crypto, but you can check the Bitcoin price chart or any crypto data to improve your strategy. Not all exchanges are allowed to operate in some parts of the world, and the lack of digital literacy contributes to a low-speed adoption of the crypto ecosystem.

Therefore, to ensure global adoption, cryptocurrencies must be regulated by official authorities to ensure safety and trust. So, here’s what investors should expect this year and beyond.

US stablecoin issuers should be regulated

Unlike cryptocurrencies, stablecoins are tokens linked to another currency, usually an official one, such as the US dollar or commodities such as gold. There are three main types of stablecoins:

Fiat-based stablecoins are backed by official fiat money that provides stability and security. An example of such a coin is Tether USDT, and it is also one of the largest cryptocurrencies by market capitalization; Crypto-based stablecoins’ value is held in reserves. For example, MakerDAO’s DAI token is backed by Ethereum but pegged to the US dollar; Algorithmic stablecoins are based on a computer algorithm that controls supply, and they are similar to central banks;

As a result, stablecoins are closer to the real financial system, so the US government plans to regulate some of them. However, stablecoins may be affected by the EU Markets in Crypto-Asset (MiCA) regulation, which will introduce stricter implementations for stablecoin issuers intended to ensure transparency for the end consumer. It could be possible that money laundering and evasion will be assessed this year, especially towards crypto exchanges.

More ETFs should be accepted

Crypto exchange-traded funds have been the craze of 2023, as numerous companies have been offering their projects for several years now, and only a few are awaiting approval from the SEC. But 2024 may be more important for BTC and ETH ETFs because they increased in value as many investors took interest in them.

These ETFs bring much more benefits to a portfolio than any other digital assets because they are not directly linked to the cryptocurrency, but instead reflect its value without exposing the user to volatility risks. The overall positive sentiment about ETFs buoyed the market during the end of 2023, so 2024 could finally handle their regulation.

Still, it may be possible that only BTC ETFs will get their recognition because authorities still do not trust Ethereum or any of its related assets. This is because Bitcoin is considered more secure, despite its high volatility, while Ethereum is more of a developer tool.

DeFi ecosystems to move closer to regulation

Decentralized Finance offers users the power of decentralization and peer-to-peer transactions. The ecosystem involves cryptocurrencies, blockchain and software, eliminating the need for intermediaries. This environment still has a lot to do to become 100% reliable, which is why the SEC and other similar authorities have targeted enforcement actions against these projects. Indeed, in the case of the DeFi mixer, Tornado Cash, where money laundering is facilitated, we can say that the newness of the ecosystem exposes it to such risks.

However, its potential is significant, which is why DeFi is possible according to regulations. The International Organization of Securities Commissions has already provided a DeFi policy for countries to handle the use of these digital instruments, so we should expect some steps forward for DeFi in the future.

Better oversight of AI and crypto

Artificial intelligence in crypto is on the rise as it can improve decentralization through automation. The hype of AI in 2023 has drawn a lot of attention to the risks of such a service, from taking people’s work to being a tool for illegal behavior. However, the potential for AI in crypto could help solve many of its existing problems. For example, AI can be used to analyze market trends and identify potential threats for investors to assess and change their investment strategy. This could help them mitigate volatility, which would solve crypto’s biggest challenge.

The EU has already introduced the AI ​​Act, which provides a regulatory framework for companies and regular users to consider before using these two technologies. Moreover, it may be possible for other areas to take an interest in AI from this perspective and design appropriate policies.

Exchange lawsuits may continue

A few crypto exchanges have gone through serious lawsuits from the SEC in 2023, as the authority considers them untrustworthy for the public. Coinbase and Kraken are among the biggest crypto exchanges on the market, and they were dragged by the SEC based on their failure to register their assets. Indeed, the SEC announced months earlier that all exchanges must adhere to their protocols in order to continue operating. But even if their guidelines were mostly not clear, they were quick to file lawsuits with these companies.

It may be possible for them to continue in 2024 as well, as most have not even gotten to the bottom of the problem yet. Although the SEC has used a powerful method to deal with crypto, the market is indeed prone to illegal securities due to decentralization. However, most of these blockchains and exchanges should better prepare their validators and nodes to protect the ecosystems. At the same time, the government can offer education courses for users to prevent them from becoming victims of hackers.

Closure

The cryptocurrency market has grown significantly in recent years, but this coverage has exposed it to several challenges that now need regulation to protect users. Therefore, 2024 could be the year when some of these issues will be tackled, such as money laundering, so that investors and developers can make use of these instruments and tokens. Still, many of the upcoming regulations may hinder investment more than before, so people should stay up-to-date on the latest laws.