Recently The National Futures Association or NFA has introduced new anti-fraud, just, and equitable principles of trade for all members that engage in digital assets and commodities activities in both derivatives and spot markets. The rule recognizes only Bitcoin and Ethereum as commodities for now and tries to defraud digital asset markets. The proposed rule, called NFA Rule 2-51, will prohibit any member from engaging in manipulative acts or practices regarding the price of any digital asset commodity. Acknowledging Bitcoin and Ethereum as commodities could be super bullish for these cryptos and whole crypto markets, let’s discuss why this could be a case below.
Crypto CFDs popularity is increasing
Since many brokers started to introduce crypto CFDs that enable traders to speculate on the crypto prices a proper FX trading education comes in handy. Axiory trading academy is the place to prepare for the massive crypto trading adoption and meet the new era prepared. The webinars provide a very useful educational basis to become a better trader. Crypto CFDs can be traded almost 24/7 giving them unparalleled availability. Because of the rising popularity of crypto CFDs and other digital instruments, the proper regulatory framework could mean that this market’s adoption increases and trading on digital assets becomes more and more attractive to average traders. Regulations protect traders and investors from scams and fraud and can be seen as bullish for the whole crypto market. As Bitcoin is the main driving force behind all cryptos any bullish news regarding Bitcoin can have a positive impact on altcoins increasing the popularity of crypto CFDs even further. But Bitcoin and Ethereum are not only cryptos that can be classified as commodities, there are many genuine projects like Litecoin that are no less powerful than Bitcoin and Ethereum. Since this rule creates a precedent for recognizing digital assets as commodities further iterations of this law should include other notable projects as well as laying a foundation for cryptos to become regulated and widely accepted as an alternative assets class.
Regulations pros and cons on traders
A well-defined and designed regulations framework can have a tremendous impact on crypto adoption. NFA Rule 2-51 ensures that operators who are offering tradable instruments to their clients are fair and in line with regulations letting traders focus on their trading endeavour and not worry whether the asset they are trading is regulated or not. Ensuring that the broker is fair and is not manipulating the prices of digital assets lets traders be less susceptible to fraud and scams. To gain clients, brokers will have to appeal to traders, and getting regulated is one of the aspects of this goal.
Pros of crypto regulations
- Protection of investors and traders – well-designed regulations can provide a sense of security for investors and traders as they know that the market is monitored and controlled by government bodies that will take action in case of unfair practices from the brokers’ side. This alone will reduce frauds and scams on the market.
- Prevention of illegal activities – regulations have the potential to reduce crypto usage for illegal activities such as money laundering, terrorism, tax evasion, and price manipulations.
- Stabilization of the crypto market – regulations tend to reduce excessive volatility making it less risky for investors to make wise decisions on crypto markets.
Cons of crypto regulations
- Reduced privacy – Controlling everything reduces privacy as increased disclosure of personal information lets governments have too much control over cryptos and their users.
- Restriction of innovations – often regulations can create unnecessary barriers to entry for new players in the market, hindering innovation and growth of the industry.
- Increased costs – compliance comes at a cost and many times only well-funded players with big budgets can comply with authorities, reducing opportunities for smaller and newer players
- Difficulty in implementation – since cryptos are decentralized in nature it is hard for governments to properly regulate them, they reduce the ability to properly monitor and control crypto players which have been the case till these days
- Too many regulations – If regulations are not well-thought by the aid of industry experts they could damage the industry. Some countries prohibited cryptos and made it illegal to trade or save crypto assets which is a very dumb approach and is mainly a characteristic of dictatorships and autocracies.
The solution
The only way to let crypto markets become the next stage for the current financial system is to implement very careful regulations. Many players are already calling the US government into action to define and regulate the crypto space, a 3 trillion dollar rising market that can have a positive impact on humankind. This will let new players enter the market easier and will not slow down innovations. The best approach for governments would be to closely collaborate with crypto industry experts who understand the importance of both regulations and cryptos. Governments tend to overregulate many aspects, and the USA is known for its super-strict regulations on financial markets. This is why all crypto lobbyists need to work together to let this wonderful new technology find its way into the general population.
