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Analysts tackle major crypto myths for regulators as digital asset market regulation intensifies

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TL;DR

  • Given the complexities associated with crypto and blockchain technologies, it’s hardly surprising that industry myths persist. Here’s a bit of help to regulators.
  • As regulatory bodies endeavor to institute frameworks for this burgeoning sector, it is imperative to demystify these myths. 
  • The North Korean Lazarus Group and the BTC crime on Silk Road at the start of Bitcoin have shadowed the industry as rife with money laundering and criminal activities.

Since the unveiling of Bitcoin ten years ago, and the subsequent emergence of Blockchain technology and other cryptocurrencies, a lot has happened, contributing to the industry’s bad reputation, crippling most investors with fear, uncertainty, and doubt (FUD) of investing in the asset class. 

As the digital asset market continues its unprecedented growth trajectory, it has garnered significant attention not only from investors and technologists but also from regulators around the world. This new frontier of finance, characterized by decentralized networks and cryptographic security, is frequently subject to myths and misconceptions.

Crypto is exclusively speculative 

Digital assets are often viewed as highly speculative and of no value. This sentiment could be understood due to the various meme coins often seen in the industry backed by nothing but sheer comedy. However, a whole other side of crypto is backed up by protocols operating as businesses with customers, revenues, and developers. 

Protocols operate on their native tokens tokens as a mode of transaction on their Blockchains. The two notable protocols are Ethereum and Bitcoin. Investing in these protocols is almost similar to investing in stocks because one has to evaluate the competitive landscape of the protocol, its customers, and its value just as one would when considering companies when investing in bonds.

Crypto is only used for money laundering 

Traditional banking systems have made us think that if one needs to invest money, one must part with their personal information, terming this as transparency. However, digital assets introduced a new investment method free from the Know Your Customer (KYC) requirements, raising questions among investors. 

Traditional banking systems must also abide by anti-money laundering policies, which is not the case for the new found industry. This is because digital assets are decentralized, making it attractive for criminals to transact their illegal businesses. 

However, all digital asset transactions are stored on a public ledger, and for one to use the money outside, one needs to exchange their coins for fiat in centralized exchanges, which are highly censored, making it extremely difficult to advance illicit activity on the ecosystem. 

Cryptocurrencies are environmentally unfriendly

Tesla’s announcement to stop accepting Bitcoin as a mode of payment until the token reaches the fifty percent threshold in clean energy put a pin on this myth. Blockchain technology operates on a proof-of-work mechanism, which requires miners to solve complex math problems on computers, which consume a lot of energy. 

However, A recent peer review indicated that digital assets consume considerably less energy than banks when accounting for notes, card transactions, and coins. This review illustrated that the information on crypto regarding their effect on the environment is misguided.

Crypto coins are not safe 

The hacking events and significant losses on crypto exchanges have spread FUD among investors. It is important to note that cryptocurrencies are backed by Blockchain technology, which is difficult to hack. Blockchain is built on distributed ledgers where information regarding transactions is stored on blocks, which are entered into previous blocks, forming a chain. 

The information on the blocks is then verified by an automated community on what is known as a consensus mechanism. These features enhance transparency in cryptocurrencies and ensure that the tokens are secure. The hacks affecting crypto are mainly associated with the wallets and exchanges, which have everything to do with how they are stored and not the currencies themselves.

Crypto coins are a scam

You may have come across videos on social media stating how crypto is fake and does not exist. However, this is not true, as these digital assets are slowly gaining widespread adoption globally. Governments have also begun incorporating cryptocurrencies as their mode of exchange; El Salvador, for instance, announced BTC as its national currency. 

The technology behind crypto is not intended to steal from you; just like any other field that criminals can manipulate, crypto has been grappling with criminals who have devised mechanisms around the technology to rip off unsuspecting investors through unregulated initial coin offerings and rug pulls, thus the bad rep around crypto.

The crypto market is currently standing the test of time in the bear market; looking back ten years since the launch of blockchain technology, a lot has changed as the technology evolves. The heavily volatile market has acquired some bad reps over the years, and some of these myths have no merit when unpacked. It is crucial for any investor to identify it is essential to do their own research before making any investment and avoid baseless speculations.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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