A recent Bloomberg report outlined a plan by the European Union to come up with a common framework for regulating the use and trade of cryptoassets.. Under the proposed framework, regulators will gain enhanced powers over crypto exchanges to ensure compliance with Anti Money Laundering (AML) and Know Your Customer (KYC) rules in an effort to combat money laundering and terror financing, as EU governments seek to tap into the potential of blockchain technology.
Predictably, this and other moves by regulators to assert themselves in the crypto space have been met with mixed responses. On one side of the regulation debate is the libertarian/anarchist school of thought which believes that crypto should be completely free of all government interference because its purpose is to fundamentally disrupt the institution of government. On the other side is the argument that the government is not going away, and so crypto has to learn to live with that reality instead of in opposition to it.
What do the experts say?
Surprisingly, many experts within the blockchain and cryptocurrency space are not as divided on the subject of regulation. To them, the real conversation to be had is not about whether crypto should be regulated, but about how that will take place and what the crypto industry should do to engage effectively with the process.
Fundstrat co-founder Tom Lee for example, believes that regulation is all but a forgone conclusion. Speaking in a note to Fundstrat clients recently, he said:
“We believe the regulatory picture is now improving — best evidenced by Coinbase and Circle ‘running towards’ regulation. We are basing this on the notion that Coinbase and Circle would only take these actions if such was the case.”
From his point of view, the recent actions of Circle and Coinbase geared toward welcoming institutional investors are a sign that both companies believe that institutional investors will shortly enter the market due to a reduction of regulatory risk – because comprehensive regulation is imminent. Thus he said, his clients should take the developments as “implicit acknowledgement” that crypto regulation is happening – whether we like it or not.
On his part, Pinnacle Brilliance CEO Roman Guelfi-Gibbs, is sympathetic toward the anarcho-libertarian strand of crypto thought, but he also holds the opinion that regardless of ideological beliefs, once crypto broke free of its rebel-friendly origins and became a bonafide tradeable asset and medium of exchange, government regulation was always going to happen.
Speaking recently he said;
“Crypto has long been the home of rebels, anarchists, and libertarians. Of course as crypto gained notoriety, it was bound to attract investors and mass public interest. When the public gets involved and market cap reaches a certain amount, government always steps in under the banner of looking out for consumers and fighting criminal behavior. We know that crypto has had more than its share of scams, so regulations will help to stop such things from happening.”
According to Guelfi-Gibbs, proper regulation is key to attracting institutional investors and sparking mass adoption because investors need reassurance and the public needs to be protected from the activities of cybercriminals using crypto to facilitate organised crime. The key to finding a balance he stressed, is avoiding heavy-handed regulation that poses the risk of stifling innovation.
Andrei Huseu, CEO of WealthMan offers a contrasting opinion though. He believes that even though governments will attempt to regulate crypto, they will not really be able to enforce regulations to any appreciable degree because of the sheer flexibility of the technology involved.
In his words,
”Interest in cryptocurrency will increase. At the same time, the regulation norms in terms of enforcement will not be really effective because of the inability of the judicial system to make changes to the blockchain-based registry.”
Based on his comments, it is unclear what impact such a scenario would have on investors or public adopters when regulations cannot be reliably enforced. A cursory examination would however seem to suggest that neither the crypto market nor prospective market participants would benefit from absolute deregulation either by design or by default.
While many will no doubt continue to insist on an ideological vision of crypto as a fundamental disruptor of government power, the general consensus within informed market and technology circles is that crypto regulation is not only inevitable, but necessary and desirable for the continued growth of the industry.