Introduction :

Nowadays, the regulation of crypto assets’ debate is a very controversial and complex
subject.

Indeed, two parties are opposed to its regulation.

Some are convinced that without this regulation, illegal activities will be the main activity of
the market.
On the other hand, you have some who are convinced that too much regulation would
hamper the evolution and the innovation and so that we must let the market regulate itself.

Thus, the question posed is :

Is the regulation of crypto assets necessary?

In the first part, I will explain you the market of the crypto assets.

In the second part, we will try to understand how the regulation should be done.

Then in the last part, we are going to study the different arguments for the self-regulation of
the market.

I. What is the crypto assets market ?

a. Definition of crypto assets

Crypto assets, or cryptocurrencies, have been in strong development for some time.
Indeed, in our days, thousands of different cryptocurrencies exist on the market.
By definition, a cryptocurrency is a currency that is exchanged on the blockchain (the
market). However, like the euro, crypto assets are a kind of currency that is exchanged. This is
why we can say that crypto assets are fungible.
Thus, a crypto asset is a decentralized digital currency that enables secure and anonymous
online financial transactions. Their regulation isn’t held by government like traditional
currencies because they are traded independently and without a central authority.

We can take the example of bitcoin. It is the most widespread crypto asset with a capital of
around 876.6 billion euros. A bitcoin, like a euro, is a replaceable currency because one
bitcoin equal one bitcoin. It is therefore possible to exchange them between them, like
euros.
In addition, crypto assets have different uses, indeed, they can be used to carry out online
transactions/purchases, also to invest or to store value digitally.
 b. Definition of Blockchain

Blockchain is a technology that allows information to be stored and transmitted

transparently, securely and without a central body. It allows users to remain completely
anonymous and is not regulated by a bank, or by a government, or by any organization.
Therefore, it allows users to collaborate and validate transactions without any formal
validation.
To illustrate this technology, we can give the following example:

Let person A find himself in a room with his friend, person B.

In this room, there is a pen and a piece of paper.

On this paper, the person A and B will write down everything that happens, every action,
every sentence, every event that will happen in the room.

At the end of each paper, these two people will sign to say that they both agree with
everything written on this paper.

This allows you to know exactly what happened and to follow all the actions and events that
took place in this room.
Thus, Blockchain technology corresponds to digital blocks with information that will be linked
together. In the blockchain, when the block has been validated, no possibility to go back.
Everyone has the same version, and everyone can consult it.
This technology allows to make a digital unique object, which is a first in history.

II. Regulation needed.

Despite the positive side that each innovation has, we can say that crypto assets and
blockchain can in a sense have negatives consequences.
First of all, the fact that nobody (state, banks, etc.) regulates the market results in a certain
price volatility. Indeed, depending on supply and demand, prices can fluctuate considerably,
which can cause losses for investors.
In addition, we also find the fact that due to its anonymous side and its decentralized nature,
cryptocurrencies particularly attract illegal activities, ranging from money laundering to the
financing of terrorism, it is very difficult to be able to trace these transactions. This kind of
transaction can be used to avoid the control of governments.

Also, at the ecological level, mining (data extraction process) consumes a very large amount
of energy which is dangerous for the environment.
Finally, the different platforms can be hacked which is a problem for the security of investors
on the platform.
We can therefore say that these negative consequences must imperatively be mitigated by
trying to regulate the market. This is what the European Union wishes to do with the
regulation: MICA (Markets in crypto assets) which corresponds to the desire to harmonize
the rules on cryptocurrencies in European countries.

To conclude, we understand here that crypto assets have negative impacts even if we can say
that they also have multiple advantages.

III. Self-regulation in the market

Self-regulation consists in the fact that a market or an industry regulates its own activity
without any external regulator intervening in the process.

Due to its significant volatility, the cryptocurrency market is constantly subject to discussions
about the possible regulations to be put in place. There has been the creation of non-
governmental organizations formed by industry participants to help regulate companies in
this area.
Additionally, self-regulation means also that industry actors are ready to set standards to
ensure market safety without direct government intervention.

Many organizations have been created to set a kind of conduct guide which explain the bases
of this regulations concerning the legal and independent analysis of the Token and its issuer,
access to the code or even KYC verification measures.

So, we can say that these organizations are trying to regulate the cryptocurrency market on
different criteria such as by assessing the compliance of crypto assets with securities
regulations.

However, it remains very difficult to be able to self-regulate the crypto asset market, in
particular because of its decentralized and mostly anonymous nature.

Conclusion :

To conclude, the creation of cryptocurrencies has made it possible to discover a new kind of
currency which has for the most part the same functions as the old currencies.
Obviously, the consequences of its use can be negative and then the question arises. In this
case, the response to the debate over the regulation of cryptoassets is complex and
constantly evolving. On both sides, the intentions are to stay protected while continuing to
make profits, some think that regulation can hinder innovation, then as for the others, they
ask for the protection of investors above all. Thus, governments and regulators will need to
strike a balance between promoting innovation and protecting investors and financial and
market stability.