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Innovative by nature, and yet still ill-equipped to withstand criticism from nation-states, blockchain perpetually lives on a thread due to the illiquid nature of the market. As a result, any negative news regarding the industry heavily impacts performance, especially Bitcoin’s. As the market continues to evolve and mature at a rapid pace, regulators and powerful economies are hurrying the examination and research phase, so as not to be blindsided by the growing decentralized social imperative. With an ongoing inquiry into the crypto space, it is yet unclear in what way projects will be influenced.

Powers Picking Around in Blockchain

Without a doubt, the regulatory input of nation states influences worldwide perception of cryptocurrency. Backlash in China and harsh crypto constraints reduced short term investor confidence in Bitcoin. In the space between, China and other countries have implemented a digital blockchain alternative that circumvents material cash.

There are two global narratives that fuel the tautology for adopting cryptocurrencies. The first is that Bitcoin is used to fund illicit activities, as it has previously been used as a payment medium on the dark web. The second is that Bitcoin is not sustainable, because it is not backed by anything and heavily impacts the environment. Nevertheless, economic powerhouses have included blockchain in their agenda, converging to reveal its advantages and how it influences existing monetary systems.

New blockchain innovations are entering the market, with centralized enterprises like Facebook and Amazon leaning towards progressive implementation. In 2018, the president of Argentina’s Central Bank addressed the G20, declaring that cryptocurrencies need further examination before any regulatory framework can be implemented. Reuters reports that, in 2021, G7 finance ministers and central bankers have highlighted the need for crypto regulations.

The Current Stance on Crypto

Both nation-states and institutional investors are demanding a more explicit regulatory message towards cryptocurrency, as digital currencies such as Facebook’s Diem and XRP, the native token of the Ripple Network, have created industry havoc. While the selling of token securities has been an issue for some time, Facebook’s digital currency prompted German Finance Minister Olaf Scholz, to refer to the currency as “a wolf in sheep’s clothing,” because its regulatory risks had not been adequately assessed.

G20 nations are intensifying their investigation into stablecoins as a new form of digital currency. As Japan’s minister impressed upon members during a G7 meeting, countries need to suitably address CBDCs, as more than 81 countries are currently exploring the phenomenon. Moreover, a group of ministers and bankers from the seven nations addressed concerns about stablecoin’s “relevant legal, regulatory, and oversight requirements.”

What’s apparent is that crypto could improve today’s cross-border payment system, according to a World Bank report; it also highlights the importance of international collaboration to find common ground. Although CBDCs are audible and transparent, a video of Agustín Carstens, BIS’s General Manager, stresses that central banks will have “absolute control” over CBDCs, which raises issues about privacy and transaction anonymity.

Who’s on the Winning Side?

Regulatory acceptance will only benefit those that entered the crypto space as early adopters. Bitcoin isn’t and will never perform currency functions, and so can be used solely as a payment instrument, because it does not have an economic support system.

Its volatility and perceived security are what give Bitcoin its allure, standing against global financial hegemony. Moreso, it is perceived as a hedge against inflation, and its conversion to legal tender in El Salvador has increased its reputation as being a possible replacement for money some day. Regardless, governments from powerhouse economies can still dictate crypto’s direction.

Currently, emphasis has moved away from Bitcoin being used as an illicit tool, and towards regulating digital and bank-issued currencies. However, when the dust settles and a complete regulatory framework is implemented, those who’ve adopted and invested in crypto will still be on the winning side.

In the grand scheme of things, crypto cannot entirely be controlled or rejected by nation-states. Bans such as the one in South Korean, and Japan’s ban on Monero can be enforced, however the borderless internet does not allow ultimate censorship of digital currencies.

As long as the narrative remains positive in the industry, every sector, including NFTs and DeFi, will flourish, conferring a model for innovation, while also changing our societal norms. In addition, the more Bitcoins that are being transacted, the more early adopters will benefit.

Source: DailyCoin

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