Cryptocurrency regulation is an incredibly hot topic at the moment, and for good reason. At the moment, regulators largely hold the fate of the entire crypto-sector in their hands. Of course, with regulation at the forefront of the conversation surrounding the space, there are some regulatory myths that are leading to a bit of confusion. Today, we’ll talk about these myths, explain why they are not true and offer up a real-world view of what to expect with regard to regulation in the cryptocurrency space.
Myth #1: India Is Going To Ban Cryptocurrency
In early February, cryptocurrencies across the market started to take a massive dive. With billions of dollars wiped out of the market in a couple of trading sessions, the spotlight was centered on the idea that India would ban cryptocurrencies and other crypto-assets. While this is just a myth, the devastation in the value of cryptos became very real, very quickly.
The myth started when Arun Jaitley, the Minister of Finance in India used harsh words to describe his views of cryptocurrency as a role in funding illicit activities. Here’s what he had to say:
The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.
Shortly after the above comment was made, stories started to swirl all over the internet that India was moving to ban cryptocurrencies and other crypto-assets. However, this is a blatant untruth. Ultimately, Jaitley was simply making it clear that the intent is to irradiate the use of cryptocurrency to fund illicit activities. Cryptocurrency, as an asset, isn’t going anywhere in India any tie soon.
Myth #2: Central Banks Will Be A Major Part Of Regulation
We became aware of this myth after writing our first article here on Seeking Alpha. The article, titled “Cryptocurrency Regulation Boosts Markets” led to various comments about why cryptocurrency regulation would be bad for the market. However, it seemed as many of those that responded to the article expect for central banks to get involved in regulation of the cryptocurrency space. This is yet another myth.
First, I’d like to say that if central banks were to get involved, I would indeed be concerned with the future value of cryptocurrencies across the board. However, this isn’t likely. The reality is that while centralizing goes against everything cryptocurrency represents, regulation simply does not, and I doubt that cryptocurrency will ever be centralized.
At the moment, regulatory conversations have to do with the use of cryptocurrency to fund illegal activities, theft of cryptocurrency and ensuring proper valuations in ICOs by treating ICOs as securities. All of the regulatory conversation thus far has been aimed at protecting those that take part in the cryptocurrency space and further validate cryptocurrency as an asset of value. The concept that central banks will get involved or somehow cryptocurrency will become centralized has no basis, and therefore should be rejected.
These Myths Are Damaging To The Cryptocurrency Sector
While it’s easy to understand why these myths are taking place surrounding cryptocurrencies, it’s also important to understand their affect on the market. At the end of the day, these myths are skewing the fundamental view of the market, therefore, leading to a baseless devaluation of a revolutionary monetary model.
By playing into these rumors, those who do are further putting undue pressure on an emerging market that has the potential to change the way we do everything from buying homes to tracking customer satisfaction in businesses.
What We Can Expect To See In Cryptocurrency Regulation
While many are fearful of regulation in the cryptocurrency sector leading to further bans and potential centralization in the space, this isn’t likely at all. However, regulation isn’t likely to halt either. It’s going to happen, and considering how quickly the conversation is ramping up among politicians, it’s probably going to happen pretty quickly. However, we believe that the regulatory changes that we’re going to see ahead are likely to be positive. Here’s how we see it:
- ICOs Will Be Treated As Securities – First and foremost, Initial Coin Offerings are likely to be met with the same regulatory scrutiny as Initial Public Offerings some time in the near future. Therefore, we can expect to see regulatory filings required prior to an ICO and regulatory oversight by the SEC.
- Cryptos Will Be Required To Report On Progress – As corporations are required to release financial reports and file updates with the SEC in the United States, cryptos may be subject to the same rules. While this would add an interesting element to the sector from the investor’s point of view, it could be a very positive thing with regard to transparency and value proposition.
- Exchange Regulation – Cryptocurrency exchanges are likely to face regulation. In particular, it’s going to be important for these exchanges to provide secure services to avoid the theft of their clients’ cryptocurrency. Exchanges will also likely be banned from making misleading statements in an effort to get traders to become more active in the cryptocurrency space.
- Cryptocurrency Becomes Akin To Securities – At the end of the day, while there are some very real differences between cryptocurrencies and securities, market cops around the world are likely to treat cryptos as they would treat shares. This regulatory scrutiny in the equities market has been a key source of protection for investors for some time and will likely do the same for crypto-enthusiasts ahead.
At the end of the day, while regulation of the cryptocurrency space is leading to quite a bit of fear, this should not be the reaction. The reality is that the regulatory moves that we’re seeing today are moves designed to protect the enthusiasts within the industry. We see no evidence that regulators around the world are looking to centralize or otherwise break the spirit of cryptocurrency. However, ensuring the security and validating the value of cryptocurrency through regulation is a process that is indeed taking place and should be welcomed with open arms.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.