Will regulation hurt cryptos?

In recent days the Crypto market has focused on plans by the South Korean government to introduce far greater regulation of crypto exchanges and increased control around the trading of cryptocurrency.

Given the importance that South Korea has in the crypto trading world and the number of traders based there, there was concern that this move could reduce the number of active traders. This has resulted in substantial price falls across the entire market.

There also appears to be moves in recent days by the Chinese government to also introduce stringent controls around Crypto trading and ownership.

Any moves by either South Korea or China to increase regulation in this area could be followed by other countries such as Japan. Japan is also a country which also has a large community of cryptocurrency traders and enthusiasts. Should all three actually choose to ban trading the market could face further difficulty.

These potential moves to strengthen the regulatory environment will have both long and short-term impacts.


What is likely to happen in the short term?

In the short term, excluding some extreme price volatility, there is likely to be little structural impact. It could take many years for any new regulations to become law in South Korea. Any laws would have to be approved by local parliament and this is a slow process.

In addition, the large number of investors based there are likely to encourage the government to adopt a moderate stance on regulation to protect their investment.

At present, no other country has made as much noise around regulation as South Korea and China so other countries are also unlikely to follow in the short term. In the long term the picture is clearer.

The Long Term View

Any moves to highly regulate Cryptos in any of these markets would be negative. This is not only from the perspective of those trading the coins on a short term basis.

Some of the noises emanating from some governments in Asia suggest even an outright ban on ownership of Cryptos!

Should over one billion people be excluded from the Crypto market in any way, the consequences are obvious. There would be severe downward pressure on prices and adoption of Cryptocurrency in the wider economy would be set back years.

The Next Steps

If your a holder of Cryptos prepare for some turbulent times. It will be some time until the market settles and when it does, where it goes from there will depend on the actions of three Asian governments.

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