Is Cryptocurrency Regulation Friend or Foe? Is Bitcoin’s Legal Battle Unfolding the Right Way?
Crytocoins, which arise from the blockchain, are not regulated in any manner. As a result, they are convenient and effortless to use and trade. And even though there are rules, they are inherent in the nature of the cryptocoins. The big question that arises here is whether the rules are a good thing or if they will lead to issues in the future.
To start, cryptocurrency is not a currency, but a digital asset, speculative asset, or as the SEC posits, a commodity. There are those who believe that they should be categorized as a “decentralized consensus network.” This type of definition means that blockchain participants will need to validate the transaction, form a consensus, and it needs to be approved. This process enables a new block to be added to the chain. Those who want to improve the existing change may initiate a fork, which is an upgrade to the system.
If the improvement is compatible with the blockchain system, it is called a soft fork. Alternatively, if it is not compatible, then it is a hard fork because the validated blocks split. These types of occurrences are what influence crypto values over time – or at least, they are one factor that does.
The nature of cryptocurrency may make it a viable option for paying for goods and services. There are many businesses that are starting to implement bitcoin payment options into their systems under growing demand from both crypto and non-crypto industry followers. There is also a growing tend to swap cryptocurrency from traditional currency to promote economic stability in countries that are experiencing instability. Such countries include Venezuela, Argentina, and Turkey.
The troubling issue that may be stifling such adoption, though, is that new forks are constantly being generated, thus leading to imbalance in a system that is not very balanced at the start. For widespread adoption, there needs to be more consistency.
With that, some are wondering whether a regulatory framework may be able to provide relief. According to Dr. Philip Hacker, cryptocurrencies are “prone to patters of re-centralization: they are informally dominated by coalitions of powerful players within he cryptocurrency ecosystem who ma violate basic rules of the blockchain community without accountability or sanctions.” He added, “This is deeply problematic as cryptocurrencies become more integrated with traditional financial systems.”
Accordingly, some are arguing that “smart regulation” should be implemented. Smart regulation is not mean to prevent innovation and creativity. Rather, there should be a balance between regulating the crypto industry and being able to maintain a crypto system.