Even though Bitcoin is almost 15 years old, a lot of people still think of cryptocurrency as the wild west, and can you blame them? There has been very little movement from governments around the world to make sense of this new technology. Of course, this could be due to the slow moving nature of bureaucracy, but it probably doesn’t help that most of the people making the rules barely know how to operate a smartphone.
So naturally any new technology is going to take some time for relevant rules and regulations, both written and unwritten, to come into place. It’s not like when cars were invented that our entire system of traffic laws came to pass right away. It’s a slow evolution of figuring out what works and what doesn’t, but that requires at the very least throwing some laws on the books, even bad ones.
In fact, many crypto supporters feel that regulation might just be the thing the market needs to go mainstream and gain a degree of stability. Crypto is a volatile space right now, and with new altcoins and exchanges popping up every Tuesday, it can certainly seem difficult to grasp for beginning investors. Regulations can soothe a lot of the concerns, particularly about potential scams or “pump & dump” schemes while also making sure that crypto exchanges have actual security protocols in place and aren’t just some guy with a laptop and a domain name.
But the big game changer when it comes to regulation is institutional support. Lots of big players are eager to jump into the crypto game, but they’re just waiting around to know what the rules will be. Even the US Chamber of Commerce has said as much, launching an amicus brief in the matter of Coinbase vs the SEC. The Chamber of Commerce is siding with Coinbase, giving the SEC a hard kick in the rear admonishing it for the lack of clear regulatory direction. “The digital-asset industry offers a case study in how regulatory uncertainty undermines innovation,” the Chamber stated in its filing. The brief pointed to the immense growth and innovation in the crypto space up until what it described as “saber rattling” from the SEC about potential regulation, which seems to have cooled the crypto market. But no regulation or direction has come about, leaving the whole market in a state of limbo.
However, cryptocurrency is limited by borders, and this fact seems to have a regulatory arms race brewing. Several countries and international organizations seem to be jockeying for the mantle of Crypto Capital of the World. El Salvador made Bitcoin official legal tender in the country, and even places like Zimbabwe and Texas (yeah, the one in the US) are exploring government-issued gold-backed crypto tokens. Meanwhile, the IRS has put forward guidelines to ensure they get their cut of your crypto profits (which is why investing crypto in an IRA helps make crypto taxes easy) and the EU is pushing their own set of crypto regulation called MiCA, which stands for Markets in Crypto Assets.
The EU is probably best poised to win this regulatory arms race as MiCA has passed all the major hurdles and will no doubt become the law across their many member states. Though there are still some questions to be answered, and adjustments to the regulation will likely come, it sets the EU up as the international body with the most clearly defined rules in the space. Like with the GDRP (those annoying “do you accept cookies?” pop ups on every website now), the EU is setting a standard that will likely be adopted, officially or not, around the world. This will give the EU a big advantage in the crypto industry, and various other industries that find innovative ways to utilize crypto. By setting up headquarters in the EU, crypto companies will have a degree of stability about their business, not having to worry about some crazy new rule coming out of left-field all of a sudden, or an overreaching government agency cracking down on them for no reason.
The US is certainly behind the curve, but still has time to catch up and even take the lead if it wants. There’s no doubt the US market is a big and powerful one, with many traditional finance organizations hungry to jump on the crypto bandwagon. It’s just a question of whether the US has the political fortitude, and tech savviness, to draft its own set of rules for cryptocurrency and other blockchain technologies.
Photo by Conny Schneider on Unsplash
