The reason crypto regulation does not work sometimes
The reason crypto regulation does not work sometimes
Regulation

The reason crypto regulation does not work sometimes

By Giorgi Mikhelidze - 7 Mar 2020

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We are all aware of how important it is for a country to set up a comprehensive regulation of crypto assets so there is at least some kind of protection from fraudulent activities. This kind of security usually comes at a cost, and that cost is the tax that people have to pay on the capital gain they achieve thanks to cryptocurrencies.

Unfortunately, there are still instances where such regulations do not change anything, or just change very little in terms of security. Most of this can be understood through the thought process of the average trader and how they approached the chaotic 2017 and 2018 ICO season.

The mentality of crypto regulation in 2018

We all remember how cryptocurrencies just barged into our lives after the 2017 price hike in December. We also remember the numerous promotions and ads from ICO companies promising traders that they are making the new Bitcoin and how investing with them would put them in the top 10 list of crypto investors.

Well, that didn’t necessarily work out now did it? Thousands of people lost their hard-earned money in these cleverly designed schemes and are still quite scared to touch the legitimate crypto market, saying that the hype has already passed.

One would be surprised considering that almost everybody was warning about scam ICOs back then, but nobody really listened. All of this brings us to the mentality with regard to crypto at the time.

Many traders could easily understand that the rise in crypto prices was mostly due to the recent hype. Most people knew that it was unsustainable but still entered the market. Why? Because they were trying to bite off as much as they possibly could before the crash would happen.

This mentality is the same as scam ICOs. Most people that invested in them understood that these companies were fraudulent. They knew very well that nothing would come out of it in the end, but they were hoping for a quick withdrawal while the prices were being artificially increased.

At that point, some forgot to withdraw in time, and some found out that withdrawal was impossible to begin with. Moments like these, when traders deliberately start ignoring government warnings and dive into markets that are 100% fraudulent, is when regulation can’t really do much.

Plus at that point, there was not much governments could do to shut down these fraudulent activities.

Attracting with diversity

Alongside the mentality of the traders, ICO companies were utilizing a new way of manipulating their investors. This was the introduction of at least something new. For example, it could have been a small cashback on the first investment or some kind of notification app for their smartphones. Any way they could stand out from the rest of the market they embraced immediately.

Only in the early-mid 2018 did trading software started to pop up. For example, the Bitcoin Revolution software was one of the first and managed to gain quite the traction. But it is still being debated to this day if the software is fraudulent.

This may be a work in progress but there are more than enough cases where trading software turned out to be just a sham. Owners of these bots would simply take their customer’s funds and replace them with virtual points on the software and make people believe that they were actually gaining or losing funds.

Is the mentality still there?

Fortunately for the market, this mentality seems to have faded over the years and people are now starting to focus on more trustworthy cryptocurrencies such as Bitcoin, ETH, Litecoin and all the others that can be found in the top 10 or 20.

However, we still see fraudulent companies popping up, but at this point, it’s a completely different tactic. Most fraudsters now market themselves as professional traders and offer to take others’ funds and trade for them.

And no matter how much regulators try to warn against this, people seem to cling to this idea without stopping.

One thing is for sure. Regulators are not against you making money through new ways. Why would they? It’s more tax for the government, and a regulator is indeed a part of the government. So whenever there’s a new announcement warning about a company or an individual, it’s for the good of the trader.

Giorgi Mikhelidze
Giorgi Mikhelidze

Giorgi is a Georgia software developer with two years of experience trading on the financial markets. He is now working to spread the knowledge about the Blockchain in his country and share all of his findings and research to as many crypto enthusiasts as possible.

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