Cryptocurrency Exchange: The cryptocurrency market is highly volatile. Investors have always been too skeptical of investing in this market considering risks. And to top off the trading risks, there are high risks of hacks and scandals associated with crypto currency exchanges.
These factors have kept several investors from trading in this market. Moreover, governments are still figuring out a way to regulate crypto currency exchanges to make trading a bit secure. However, there is still a long road to go for the government before we get crypto currency exchange regulations.
So, what can exchanges do to ensure that trading in this exciting, yet volatile market becomes a tad bit secure? The answer is simple. Self-Regulation of crypto-currency exchanges.
Self-Regulation: What is it?
Now, let’s just get one thing straight, self-regulation is not a new concept. There have been several instances where self-regulation has worked and shown growth in the respective market sector. For example, commodities trading is self-regulated by the National Futures Association (NFA).
Similarly, for the cryptocurrency market, self-regulation can include different aspects such as code of conduct, guidelines, industry organizations that will guide the market participants for secure trading.
Self-Regulation can be based on different ways such as KYC (know your customers), security against hacks, or maintaining transparency. Apart from the set self-regulation guidelines by the International Organization of Securities Commissions, crypto-currency exchanges can also be regulated by independent market associations similar to NFA.
Will Self-Regulation Work in the Cryptocurrency Market?
The biggest question is whether self-regulation works in the cryptocurrency market. Will it help to regulate the operations in this highly volatile market? The answer is YES!
There are several examples where self-regulation of the cryptocurrency market has helped traders trust investing and trading cryptocurrency.
The Coincheck hack in 2021in Japan is a prime example of how self-regulation can help maintain the security of this market. The hack resulted in crypto currency exchanges enhancing their security checks. In fact, Coincheck went a step further by giving their customers partial refunds. This was done in association with the Japanese government and market associations.
Another example of self-regulation for crypto currency exchanges came when the South Korean government announced overheated trading. This prompted crypto-currency exchanges to implement self-regulation strategies that will protect the interests of investors, their assets, and provide greater transparency.
So, yes, the self-regulation of crypto exchanges can work.
Have countries already implemented the self-regulation of crypto exchanges?
Although there is a still long road ahead, some countries are implementing the self-regulation of cryptocurrency.
Japan has implemented self-regulation with the Japanese Blockchain Association which has more than 100 members. Amongst these 35 are cryptocurrency exchanges. South Korea blockchain association also has 25 members with similar goals.
India has established the Blockchain and Cryptocurrency Committee (BACC) with 7 crypto exchanges as part of the association to regulate the market and create a code of conduct. CryptoUK is another self-regulatory committee in the United Kingdom formed by seven cryptocurrency exchanges.
The USA is still in the phase of proposing a self-regulatory body. However, Gemini developers have proposed the establishment of the Virtual Commodity Association (VCA) as self-regulatory for crypto exchanges.
Governments are still far away from establishing any regulatory commission for the cryptocurrency market. Until then, self-regulation offers a great way to make this market secure and protect the interest of investors.
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