Crypto Regulation - For Or Against?

As cryptocurrencies such as Bitcoin and Ethereum gain popularity, the possibility of increased regulation grows. This begs the question, is regulation in the cryptocurrency space good or bad? There are two main sides to this argument.

Case for Regulation

One of the main arguments to regulation being positive for the cryptocurrency asset class is the elimination of scams. Projects such as Bitconnect have received massive negative media attention on media sources such as John Oliver.

Bitconnect is not the only case of malicious intent through cryptocurrency. Several ICOs such as Recoin and Diamond Reserve Club have run into trouble with the SEC (securities and exchange commision) falsely claiming to be backed by certain assets. Not all ICOs are bad, but the ones that are give the rest a bad name.

If Bitcoin ever wants to see mainstream adoption by merchants and ETF’s (exchange traded funds), it needs to be regulated more. ETFs are key to any assets exposure. This is especially true with cryptocurrency as ETFs will allow investors to forgo the wallet and storing process.

Case for No Regulation

One of the most attractive features of a cryptocurrency is censorship resistance. Censorship resistance is an aspect of a currency that allows it to be transacted regardless of who doesn’t want the transaction to go through. If Bitcoin and cryptocurrencies are regulated too much, this desirable feature could be lost.

If left unregulated, it’s also possible that cryptocurrency will continue to be used for private transactions as we saw on the Silk Road. Bitcoin is pseudo-anonymous by nature meaning that all transactions are visible, but only by a string of characters that link to a wallet address. If regulation causes Bitcoin wallets to be linked with identities, this use case could be wiped out entirely. While Bitcoin was used for some illegal things on the Silk Road, it served a very useful purpose to those who needed it.

Another perk of no regulation is that it leaves the asset class open to more people. Currently, US accredited investor laws only allow individuals who make $250k+/yr and have a net worth of over $1 million to invest in certain assets. Cryptocurrency is such a revolution in finance as it allows anyone with an internet connection to invest in their favorite projects.

Overall, there are arguments for both sides. Just like everything that goes mainstream, it will get regulated eventually. China has already taken massive steps regulating cryptocurrency, which is a great sign as it joins the likes of the very successful Facebook and Twitter.