Cryptocurrency came as an innovative investment option a decade ago. Bitcoin was the first currency to get a global launch. Investing money in bitcoin is the most popular essential for some investors in some countries.
The concept of cryptocurrency garnered attention from across the globe. The basic building blocks of crypto include blockchain and decentralized finance.
Understanding the blockchain technology
Blockchain is nothing but a group of chains that helps in storing user transactions. Every transaction undertaken breaks down into single units of a block. These blocks save the transaction details by providing a unique identification number. This identity or transaction code is not related to or tied down to the user. It is a combination of alphanumeric characters. Such transaction details are then loaded onto a public ledger accessible by anyone.
Understanding decentralized finance
The concept of decentralized finance has its roots in the 1980s. The idea was conceptualized in the US, wherein users wanted to undertake fund transfers. But, this fund transfer did not necessarily include the banking system in it. Yes, that’s the very basic idea of decentralized finance in crypto.
Users can undertake the peer-to-peer transfer of cryptos through their digital wallets. There is no intervention from any regulatory authorities to check these transactions. Central banks, regulatory authorities, and monetary agencies stay away from this model. Additionally, cryptos do not peg down to any particular country’s currency.
The idea of a decentralized finance model has irked many. Investment experts and other monetary authorities have always been vocal about it. There are many threats and vulnerabilities to this investment model. Funding for terrorism, anti-money laundering, and theft are a few examples of this.
Government coming forward to regulate this investment
Yes, it is true that in the beginning, the government did not take this investment seriously. But the case is not so same today. Every country is looking at opportunities to regulate this investment.
This is a positive step toward accepting crypto investments. Many countries have been setting up their steering committee to study this model. The working model along with its pros and cons. the latest to join the list in the US and India. The US president has provided his approval to set up a steering committee to watch cryptos. India on the other hand has imposed a tax regimen on crypto investments. All these steps are a positive sign toward the growing acceptance of cryptocurrencies.
Along with cryptos the need for crypto exchanges also came up. Many countries have their federation involved in issuing licenses to such exchanges. There are a certain set of prerequisites setup which binds exchanges. Any deviation is being brought under the radar of such federation authorities.
Government entering into taking action to regulate cryptos
The regulatory landscape across the globe is springing into action. The UK government came forward with launching native tokens. The government shall distribute its digital token or stable coins. These coins will have their cons pegged down to the local currency. This is a way to ensure despite market fluctuation the coins continue to have a fixed sale price.
Other than being an investment, the government is also looking to bring developments. Funding for development and innovation is being undertaken to foster a better community. With cryptos ruling the market, investments on the internet, and allied technology. Such steering committees are also keeping a close watch on the negative side of cryptos. Cryptos may inevitably be used for money laundering. There are illegal transactions that can be undertaken using this currency.
But the good side is reducing the time for completing each transaction. The classic or real-world example is Ukraine. The country was able to generate more than 500 million in funding on cryptos. Investors and philanthropists from across the world came forward with their donations.
The US president has signed an executive order on regulating this investment. The country is promoting cryptos keeping its pros and cons in mind. The country is also trying to establish its connections with crypto exchanges. Such exchanges can provide the details of total investors along with volume. Such data sources will allow the government to make better decisions in times of crisis.
In a nutshell, indeed, cryptos are here to stay. We only need to wait to watch if it will take over traditional currency.
