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Cryptocurrency has hit the headlines recently, with the industry experiencing rapid fluctuations. Headlines have included Coinbase seeing its stock price plunge by 81% this year whilst Bitcoin and Ethereum simultaneously experienced a three-week high from June into July. Naturally, the buzz around the events has caused a lot of speculation. Mixed with the fact that cryptocurrency is so different from fiat currencies and what individuals are used to, coupled with confusing vocabulary to get to grips with, it is understandably something that may seem confusing for many.
This confusion is even more damaging than other misconceptions of cryptocurrency. However, once the understanding of cryptocurrency is grasped, users open themselves to an array of possibilities that cannot be achieved with fiat currencies alone.
Just like any advances in technology, many questions will be asked of cryptocurrency as it becomes more mainstream, with people wanting to know why and how to use it. This was similarly seen when online banking was first introduced in the late 1990s. Customers were afraid of the security features, as well as not understanding how to use it or set it up.
As cryptocurrencies are a relatively new addition to the financial world, there are many conflicting opinions out there.
Uncertainty around crypto usage
Just like anything involving money, crypto needs to gain trust amongst potential users for it to be used by the masses. Part of this is for individuals to first understand the benefits of using crypto, and how to use it.
Research shows that 23% of population agree the most popular reason why people have already bought, or intend to buy, cryptocurrency is that they believe it is going to be very influential in the future, which steads well for future expansion of its users. To encourage more usage and to gain more potential users, a single access platform must be used for all crypto services, which will allow crypto customers to slowly learn how to explore the financial possibilities of this new digital currency and learn how to be bold with their financial decisions.
Another part of understating the potential of crypto is knowing how to benefit from merging fiat currency and cryptocurrency, especially as traditional payment methods will continue to have a role to play in how we conduct our financial lives. The Financial Conduct Authority (FCA) is consulting on new rules on how cryptocurrencies are promoted, indicating they could one day become a mainstream form of payment alongside standing traditional payments. FCA is implementing rules that will see any company promoting crypto-asset investments will have to follow the same rules as those promoting stocks, shares and insurance and other financial products, with the risk of facing fines if the FCA rules are not followed. Such rules will help the merging of both and will revolutionise how payments are made every day.
Protection of assets through compliance
A lot of speculation around the regulation and compliance of cryptocurrency has pushed potential users into steering clear from investment and usage. For example, cryptocurrencies have been accompanied by new risks, as criminals use regulatory blind spots to launder money, finance terrorist activities, and commit other financial crimes. However, a key appeal of crypto to its users is decentralisation. This means that there isn’t one body that dictates and regulates cryptocurrency, instead numerous bodies call the shots to find reasonable policies.
Cryptocurrency compliance involves the process of meeting different requirements put in place by cryptocurrency Anti-Money Laundering (AML) regulations. This involves implementing proper tools and internal processes to effectively mitigate money laundering and terrorism financing, to protect crypto users’ assets. Within tackling these risks, the Financial Action Task Force (FATF) recommends that financial institutions take a risk-based approach to ANTI-Money Laundering (AML) and Counter-financing of Terrorism (CFT) compliance as well as extending to cryptocurrency service providers. In establishing risks, cryptocurrency financial firms perform individual risks. This involves collecting and verifying information about their customers and building profiles to inform future compliance decisions.
EU member states and the European parliament have also recently agreed on the terms of rules that aim to protect consumers while also allowing the crypto market to flourish. The Regulation on Markets in Crypto assets (MiCA) covers the traceability of crypto assets being traded in the bloc and wider market rules, to protect against market manipulation. Regulated companies will face tougher standards to protect consumers as well the risk of being liable in the event they lose investor funds.
Having security tools in place
The growing popularity of cryptocurrencies has presented numerous opportunities for security breaches but finding a way to manage the risks is important, just the same way protecting any transaction is. Cybercriminals, malicious agents, and hackers are attacking and compromising crypto assets possession as well as identity theft. Therefore, it is important to identify the prominent cryptocurrency security issues and best practices for dealing with them.
The main way to resolve the issues pertaining to cryptocurrency is to follow Cryptocurrency Security Standards (CCSS). They are important tools for enabling end-users to ensure they are making smart decisions in their investment in suitable services. The standards also help investors to identify credible platforms before forming any association with them. The standards are a guided approach to avoiding cryptocurrency security issues and include certain steps such as creating a crypto wallet, securing storage of crypto keys, carrying out third-party audits, following data scrutiny policies, and keeping documented audits of transaction logs. These security approaches apply to most crypto exchanges, and with a greater understanding of the risks involved in using cryptocurrency as well as the tools in place to prevent and attack the risks, users will give their trust.
Having a clear understanding of the risks involved in crypto alongside compliance and security tools in place to protect crypto assets is important when there are so many conflicting opinions out there, conflicting opinions that cause confusion. Once trust is put into the regulation of crypto and the benefits of using both crypto and cash in everyday life is understood and experienced first-hand, users open themselves to an array of possibilities that is unachievable with traditional payments alone.
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