The debate around cryptocurrency regulation in the EU has never been more intense than with the recent announcement of the MiCA (Markets in Crypto-Assets) regulation approval and the attempt to regulate a rapidly evolving technology. Governments around the globe seek to set their hand on a concept that most don’t fully comprehend. The reoccurring theme is that of protecting investors while reducing fraud and illegal activities using cryptocurrency.
Copyright : Chainalysis
Even though cryptocurrency has experienced a widespread mainstream adoption in the recent years, according to a report by Chainalysis, the value of cryptocurrencies from illicit activities has never been as important as in 2021, with illegal addresses receiving more than $14 billion. On the other hand, the portion related to illicit activities of the overall cryptocurrency market, however, is shrinking as the sector sees adoption from private and public institutions.
Copyright : axios.com and Chainalysis
As the charts at the top shows, the share of all illicit transactions per year is the lowest it’s ever been and is experiencing a declining trend apart from 2019. This downward trend can be explained with an increase in investors and a widening audience using cryptocurrencies for legal purposes as well as a greater adoption rate.
Nonetheless, illicit activities related to cryptocurrencies are significant and growing as fast as the cryptocurrency technology itself. More and more ransomware is appearing and hackers and scammer seem to be attacking everyone, be it companies or individuals. YouTube and other social media ads and comments are riddled with crypto scams. Crypto scams and rugpulls seem to have become the norm in the crypto wild west.
There is no doubt that regulation is essential in providing the consumers and investors with a minimum amount of security when interacting with cryptocurrency. On the other hand, it should be everyone’s responsibility to manage their funds according to their risk tolerance just like with any other asset class. To keep a balance between security and liberty, it is crucial that any regulation considers the fact that cryptocurrency itself is not a bigger threat than the legacy cash system in money laundering and other illegal activities as crypto is arguably more transparent. Whatever regulation may see adoption in the end, it certainly paves the way for Central bank digital currencies and a greater transparency of transactions in favor of security rather than liberty.
