There has been much debate about how the US government should treat cryptocurrencies, but there appears to be little consensus on how it should actually do so. This lack of clarity has created confusion and hesitancy among investors and other financial stakeholders, which may stifle cryptocurrency adoption in the United States. It’s time for the government to step up to the stage and provide clear regulations regarding cryptocurrencies, lest its inaction results in the ecosystem being crushed by those in more forward-thinking jurisdictions that have already taken the necessary steps towards regulation and adoption.

<a href="https://www.fau.edu/newsdesk/articles/regulatory-ambiguity-in-bitcoin-market.php">The Florida Atlantic University’s College of Business in the US defines regulatory ambiguity </a>as the uncertainty in the exactness of policies controlling certain conduct or industry caused by dormant imprecise, conflicting, and selectively applied legislation. Regulatory uncertainty makes it hard for people to start businesses in the crypto market, stopping new ideas from coming up.

After more than a decade, uncertainty about the legal status of the peer-to-peer vigil currency Bitcoin keeps businesses from starting up. This raises the risk and costs of complying with the law, discouraging people from starting businesses. In addition, many banks and other financial institutions aren’t ready to use full blockchain technology. Again, this is due to the uncertainty about how regulations will work. 

<img class="aligncenter" src="https://www.crypto-news-flash.com/wp-content/uploads/2021/06/btc-5019625_960_720-960x600.jpg" alt="Cryptocurrencies" width="597" height="373" />
<h2>The Absence Of Regulatory Clarity In The United States: A Significant Barrier</h2>
There has been a significant push for greater transparency and accountability from organizations that offer an ever-increasing range of digital assets and services in the wake of rising concerns about financial instability.

It’s odd, though, that cryptocurrencies like <a href="https://www.cryptoknowmics.com/news/portugal-records-first-ever-real-estate-purchase-through-bitcoin">Bitcoin</a> and Ethereum were hailed as a way to send money throughout the world without the involvement of third parties like banks. Bitcoin was the first to enable the transfer of digital currency without a middleman. A concept that directly competes with the traditional financial system’s resilience against attacks on the network.

Shady people took advantage of the fact that they could move money quickly, cheaply, and, in some cases, anonymously. They did so by avoiding many existing KYC/AML checks that banks and regulators have put in place to stop them.

Some people who ran <a href="https://www.investopedia.com/terms/p/ponzischeme.asp">Ponzi schemes</a> and people who were blackmailing businesses with cyberattacks started using cryptos to pay for things. Hence, it was clear why people didn’t trust cryptocurrencies.

Regulators expect stricter standards when it comes to the investment of big amounts of money and the fiduciary obligations of institutions. Institutional investment in the larger digital asset ecosystem is sluggish because of the lack of fulfillment of these prerequisites.

As a result, regulations are once again driving the usage of cryptos. They are not trying to avoid the law but as a way to buy them since there is now a bit of legal clarity on the matter. Investors in crypto understand that the path to a larger crypto future lies in institutional adoption. Also, the path to institutional adoption lies through regulatory clarity.

People believe that regulation is bad for cryptocurrency. It is, in fact, the single most important driver of the bull market. More regulatory certainty bodes well for cryptocurrency.
<h2>The case of the SEC vs. Ripple: How it’s Going</h2>
The US government’s stance on Bitcoin and other cryptocurrencies is typically favorable for blockchain rules. However, all four federal agencies, the <a href="https://www.cryptoknowmics.com/news/nvidia-to-pay-sec-5-5m-for-allegedly-failing-to-disclose-crypto-revenue-boost">Securities and Exchange Commission (SEC</a>); Internal Revenue Service (IRS); Federal Trade Commission (FTC); and Financial Crimes Enforcement Network (FinCEN), have differing views on various aspects of cryptocurrency. As a result, they have been discussing regulatory issues surrounding blockchain technology on their stances on regulation.

This isn’t to say that ICOs like Telegram aren’t being punished in the US. On the contrary, the SEC has been cracking down on ICOs like this, making <a href="https://decrypt.co/33572/telegram-to-return-1-2-billion-under-proposed-settlement-with-sec">Telegram give back $1.24 billion</a> and putting the future of cryptocurrencies at risk because of one lawsuit against blockchain innovator <a href="https://www.cryptoknowmics.com/news/hinmans-speech-not-reflective-of-sec-court-declares-on-sec-vs-ripple-case">Ripple Labs</a> Inc.

The lawsuit, filed on December 22, 2020, claims that Ripple raised more than $1.3 billion through illegal means. It also says that Christian Larsen, the co-founder of Ripple, and Bradley Garlinghouse, the current CEO of Ripple, are to blame. In addition, the SEC says that they made a lot of money in the process.
<h2>If SEC wins!!!</h2>
If the SEC prevails, XRP (the native cryptocurrency of the Ripple Blockchain) will be classified as a security rather than a currency in the United States. This could set a legal precedent for other cryptos to be categorized as securities. As a result, the case against Ripple is critical for all stakeholders in the crypto industry. This includes investors, blockchain developers, and policymakers throughout the world.

If Ripple wins, it would be a big victory for crypto. A big win at a time, the industry is growing quickly and getting more attention from regulators on a lot of different fronts. For example, if you think about it, Companies including <a href="https://www.cryptoknowmics.com/news/microstrategy-reports-q1-revenue-loss-amid-bitcoin-bear-market">MicroStrategy</a>, Massachusetts Life, and other asset managers all bought bitcoin due to the US Commodity Futures Trading Commission’s declaration that Bitcoin and Ether are commodities.
<h2>Institutional Investment: Opening the Doors of Opportunity</h2>
The adoption of cryptocurrency has been a source of contention among global economies and governments. Some administrations retain a generally pro-Bitcoin position and give recommendations to encourage its use. However, others remain indecisive, having yet to issue any formal conclusions on legality or acceptance. Some countries continue to believe that introducing cryptocurrencies will result in a loss of economic control. It will also result to a global shift toward decentralized economies. Several countries, including Russia and Colombia, have outright outlawed Bitcoin and other cryptocurrencies, prohibiting their usage and investment. Blockchain holds the dual promise of faster and cheaper transactions for financial services firms. But a lack of regulatory clarity about blockchain could slow innovation.

Institutional investors have taken an interest in Bitcoin, which was previously driven by tech enthusiasts and small-time investors due to the rapid growth of blockchain technology and the wide range of applications it supports. However, even though the cryptocurrency market is valued at over $2 trillion, institutions cannot take advantage of the industry’s growth potential.

However, institutional and corporate enthusiasm for blockchain-based solutions like cryptocurrency, DeFi, Web3, and others is at an all-time high. On the other hand, institutional investors watch the crypto market cautiously. They include asset managers, pension funds, and insurance companies. This is because many governments and regulatory bodies are still unsure of how to regulate digital assets.
<h2>Where this leaves Institutional Investment and Investors</h2>
Many questions remain unanswered in the digital asset market. This is why institutional investors have historically been wary of investing in space. Institutional investors’ decision to hold back their enormous firepower is based on the lack of regulatory guidelines. It is also based on the recurring problems of liquidity and security in the broader crypto ecosystem.

In 2020, a survey by <a href="https://www.fidelity.fi/articles/pages/2022-02-17-digital-assets-investors-perspective-1645112556488">Fidelity Digital Assets revealed</a> that, despite managing trillions of dollars in assets, most institutional investors had made no investments in digital assets. Institutional investors want the certainty of legislation, regulatory monitoring, and much-needed legal clarity. They want this before committing major capital to digital assets - most of which are still lacking.

According to research, regulatory certainty in numerous countries encouraged individuals, asset managers, and multinational organizations to buy cryptocurrencies in 2020. Some countries have enacted legislation to regulate the trade of cryptocurrencies, including Japan, Singapore, Switzerland, and South Korea.
<h2>Where This Leaves the US Financial Institutions</h2>
Many banks and other financial institutions aren’t ready to use full blockchain technology. This is because of the uncertainty about how regulations will work. To make the US financial system more transparent and resilient, the Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation should form a working group on blockchain technology. So, instead of proposing new rules and regulations, the group would clarify how existing rules apply to blockchain technology.

Is Regulatory Clarity Holding Back Cryptocurrencies Adoption in the US?

Cryptocurrencies have been growing steadily more popular and widespread over the past few years, but it has yet to reach the mainstream in the United States

Oluwademilade Afolabi is a freelance writer and editor passionate about blockchain technology and the health industry. He is a 6th year medical student, and has worked with various companies and blogs since the blockchain revolution began.

Is Regulatory Clarity Holding Back Cryptocurrencies Adoption in the US?

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