The possible regulation of cryptocurrencies is very much a heated debate in the US and the rest of the world. Since the market is estimated to be worth trillions of dollars, some argue that additional oversight is necessary. But as you would expect, some oppose the idea.
Our task is to present both sides of the argument in an attempt to shed some light on what’s at stake, starting with:
Protecting the investors
Without investors, crypto would not be where it is today. Hence, it makes sense to grant them some form of protection. As of right now, it lies in a proverbial Wild West environment where market manipulation and scams of all sorts prey on the unwary. The good news is, there has been some innovation in this field, with individual companies like SmartCredit.io offering crypto loans in a structured environment where both the borrowers as well as lenders can initiate an agreement with confidence. In case anything goes wrong, the borrower’s existing assets are used as collateral.
Putting an end to tax evasion
The sad reality of Bitcoin and other cryptocurrencies is that individuals with less than good intentions tend to love its pseudonymous nature. Given how easy it makes it to conceal their ill-gotten riches or avoid paying taxes of any kind, why wouldn’t they? Currently, this issue is addressed by various crypto platforms implementing KYC measures that require you presenting a proof of identity before letting you create an account with them. But the approach is by no means bulletproof. One way to circumvent it is to simply use a crypto exchange without such requirements or resort to crypto ATMs.
Crypto would no longer be decentralized
The very essence of Bitcoin and other cryptocurrencies that follow in its footsteps is to create a decentralized environment where banks and financial institutions would no longer have a say in how people go about their transactions. As soon as you appoint a governing entity to regulate it, the decentralization is ultimately no longer there. In other words, decentralization puts the power back to the people, whereas regulation does the opposite. If we were to regulate cryptocurrencies, a major aspect of their appeal would be lost.
The idea of decentralized finance is to put power back into the hands of ordinary people.
The prices would fall
Expanding on the argument presented above, if the majority of those would otherwise be interested start perceiving cryptocurrencies as less valuable, the market would reflect that, and crypto prices would fall. The example of China’s stance on Bitcoin and its subsequent ban illustrates the point quite well. Days, if not moments after, their citizens started panicking and selling off their crypto assets, resulting in a bearish market behavior. But although we can expect a short-term price drop in the event of US regulation, this does not rule out the possibility of Bitcoin prices climbing in the long run. In the end, the manner in which cryptocurrencies are regulated would be the factor that tips the scale in either one direction or the other.
So what do you think? Are you for or against regulating crypto? Be sure to reach out to us and let us know!