It is clear that regulatory organisations such as the International Monetary Fund (IMF) and the US Securities and Exchange Commission (SEC) do not get along with cryptocurrencies, as indicated by the increased monitoring of crypto assets and enterprises over the last several months. However, this goes against common sense when one considers the rising significance of decentralised financial systems and crypto assets to economic systems.
Crypto assets have been around for the better part of a decade, but it wasn’t until lately that they entered the public. However, because of their recent success, there is now a pressing need to build a new legislative framework that considers the myriad of ways in which crypto assets might be used.
Not all of them can be categorised as financial instruments and securities since some may function as decentralised network and storage providers, gaming and streaming platforms, and even alternatives to fiat money, among other things.
It has become more difficult for regulators to keep up with the constantly shifting cryptocurrency market and routinely get familiar with the technical breakthroughs being made in the field. In addition to this, monitoring network activity and transactions is not a straightforward task. This is especially true when crypto-mixing services such as Tornado Cash exist to safeguard the anonymity of its customers.
In addition, there is no standard vocabulary that applies across the board to the many facets of the crypto realm. For instance, existing regulatory regulation does not recognise new jobs such as miners, validators, or protocol developers. This is the case with several cryptocurrencies. Participants in the financial market are often given authorization to participate in a restricted set of activities that are predetermined.
Participants may be difficult to identify due to the underlying technology, may play a casual or voluntary role in the system, and may not automatically inherit the accompanying governance, prudence, and fiduciary obligations. These characteristics may make it difficult to determine who is participating in the system. On the other hand, the untangling of conflicting tasks that have amassed in a few significant organisations, such as bitcoin exchanges, may also be an issue that regulators need to take into consideration.