The events of the past several months have sent digital assets into a bear market, which isn't very comforting to central banks. It also brings to light the very volatile nature of some crypto products and enforces some concerns of potential government regulators.

Investors that trade in stocks generally know what to expect from them, similar to players in their favorite vegas online casino but it is not as clear with crypto. Governments in the various worldwide markets heavily regulate stocks to protect investors from many risks.

However, regulations are yet to be placed on the crypto market. This is because they see the market as less certain than stocks, which means a greater risk to the consumer.

At its high point in 2021, the crypto market cap reached nearly $3 trillion, which is nothing compared to the stock market, which is worth 16 times more. However, it was still significant because the asset is just over a decade old.

After last year's peak, Bitcoin fell more than 70%, with the total crypto market now worth under $1 trillion. As a result, the U.S. is undoubtedly going to have to explore cryptocurrency regulations. It's now only a question of when not if.

Regulation Could Affect Future Investment

Some experts feel that regulation can be nothing but positive for the industry. Many large groups have been waiting for regulation and would like to invest in the crypto market, but without regulation, it's not viable for them to do so.

In addition, disclosures created by regulation would create transparency, showing each investment's risk profile. That's not something investors can currently get with crypto.

This lack of transparency is responsible for stablecoin TerraUSD's massive crash in May, which also affected LUNA, its sister coin. It's also what caused problems for the Tether USDT stablecoin recently.

The Commodity Futures Trading Commission fined USDT's issuer $42 million for violating several CFTC regulations after having already paid the New York Attorney General more than $18.5 million in a 2021 settlement. The problems were due to issues with the audit system for USDT's treasury. Cases like these could have been avoided with government regulation.

When Will It Happen?

One of the main reasons U.S. regulators haven't acted quicker is that the issues related to cryptocurrency mainly affect other parts of the world and aren't problems they can solve.

Instead, regulators are more concerned with protecting the financial stability of domestic investors. So while advanced economies may have the most money invested in cryptos, the most significant problems have come in the markets of developing countries.

Germany and Japan are ahead of the game and have implemented laws that provide structure for crypto companies and investors. It also guides them to develop and gain new business. For example, not long after Germany's announcement on regulation, the blockchain giant Binance requested approval from government regulators to do business there.

Crypto companies in the U.S. should know that regulation is in their future. If the industry wants to become more stable, these companies should be open to restructuring their framework of how a big part of the market operates.

Regulations To Bring Needed Improvements

Leaders in the industry need to consider how these reforms can help achieve the objectives of both parties. When regulation becomes a reality, it should be a welcomed change for investors who will see cryptos have better and more stable days ahead.

WIth big crypto companies spending millions on lobbying, similar to what the financial sector did before that market crashed in 2008, it could take several years before regulation ever happens. Volatile crypto products have historically increased the damage done during a crash.

These companies should take this opportunity to recognize some of their products aren't in line with organized and fair markets. Without taking action, another crash will likely happen sooner than we think.