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Date: 2024-05-26

Why Isn't The Blockchain Cryptocurrency Market Regulated?

The "crypto" market is one of the most dangerous for any would-be "investors"; typically because it's almost entirely unregulated.

Regulation is a process by which a government will stipulate various practices through which a bank or financial organization should operate. The process of regulation mainly gives said companies a "code of conduct" to follow in order to both protect its customers and the market in general.

The main reason why regulation was introduced is because of the financial markets' tendency to run wild without supervision. Bankers selling securities on assets which either don't exist, or are just toxic (very low value), greedy consumers buying into pump & dump schemes and the list goes on.

The point is that whilst it's essential to keep your wits about you, the "system" has been designed to provide a certain level of safety for the majority of customers. To this end, the likes of the SEC in the US and FCA in the UK have a tremendous amount of power and responsibility in order to ensure that banks are behaving responsibly with other people's money.

Whilst this works well for the banks, for an almost entirely "decentralized" system (which is what the "crypto" space is all about), regulating the idea/process/system is a very difficult task. Banks are relatively easy to regulate because they have an actual location & staff... "crypto" not so much.

Therefore, the "crypto" space is what's known as being entirely "unregulated". There is no central body/committee who is responsible for determining the way that the system will grow, and unfortunately means that every buyer of the various tokens is entirely responsible for themselves.

For this reason, it's important to understand the whole process and how it works. This tutorial looks to do this...

How The "Crypto" Market Works...

The "crypto" market is what's known as a secondary market.

This means that you're trading directly with other people - not from a centralized party. The importance of this is that since the trading is done between private people (IE not with a business), there is very little a government can do to regulate it.

"Crypto" is a large term, used to describe the multitude of "alt" coins on the market. In other words, it's not just "Bitcoin" but all the other coins that allow users to trade with others. This means that if you're looking at getting the most out of the system, you have to be sure you know what you're doing.

When you "buy" a crypto token (typically Bitcoin), there are two ways to do it. You're either able to trade it for "fiat" currency (in an exchange like CoinBase), or you're able to trade it for another "crypto" token (in an exchange such as Binance).

This is important, as by having centralized "exchanges" (which are real businesses), the government is actually in a position to regulate them effectively. Not only this, but to also ensure that you're able to get the most out of the service - it gives you the ability to manage any of the potential problems that they may have.

To this end, a number of governments have regulated the use & scope of the aforementioned exchanges - most notably in the likes of China & South Korea. Imposing such stipulations as "Know Your Customer" basically means that you'll be able to determine which system is able to provide users with the most effective means of delivery for the service.

Ultimately, whilst the service allows users to get the most out of the system, it's a very delicate time for "crypto" as it begins to pick up steam. We've found that whilst the service is entirely focused on getting the most out of the system, you really need to be careful in who you trust and where you put your money.