What Would Bitcoin Regulation Actually Look Like?

Bitcoin Regulation

Opinions about the possible regulation of cryptocurrencies vary from person to person, whether or not those people have cryptocurrency holdings. There are those who believe that regulation would harm digital currencies, since it would take away at least part of the decentralized nature that makes them work. There are others who believe that regulation would at least encourage more investment in infrastructure, which would help cryptocurrencies achieve stability and be less volatile.

What often gets lost in the mix of these conversations is an important question. Aside from talking about how cryptocurrency regulation would affect currencies, there is at least as much uncertainty about what Bitcoin regulation would look like. As governments talk, often in vague terms, about the possibility of regulating cryptocurrencies, it seems that a good place to start the conversation would be to point out What crypto could be regulated. And some answers may be among the following examples.


SEE ALSO: Regulation Is Key to Mass Cryptocurrency Adoption, Says US Fed Official


How are cryptocurrencies regulated?

The most prominent example of government intervention to affect how cryptocurrencies are used is Porcelain. The Chinese government shut down exchanges in the country and used existing land use regulations to drive miners off Chinese soil. However, even that has not ended the use of cryptocurrencies in China, because the infrastructure of Bitcoin and other cryptocurrencies means that they can still be traded even with restrictions on exchanges. You can’t completely stop something that doesn’t have a solid physical source.

Does this mean that cryptocurrencies cannot really be regulated?

No, it doesn’t mean that. It makes it more difficult, but there are ways to at least discourage crypto, or at least certain uses of it, among the general public. For example, the most likely way we will see crypto regulated by major economies in the West is by taxing money that is used to cash in a digital token. So if, for example, you won big on the Ethereum Casino at Cloud Betand wanted to use the proceeds to make a major purchase, the point at which he was looking to convert ETH to USD would be where the government would step in.

So you could never convert cryptocurrencies into fiat money without paying taxes?

Not so fast. The difficulty such a law would encounter is that it can only be applied to specific currencies. So if the government regulated Bitcoin, ETH, XRP, and Dogecoin, holders could simply move their assets into Litecoin and make money out of it. New tokens are being minted so frequently that there would be a ton of loopholes, and new ones could be created as fast as existing ones are shut down by the government.

So… checkmate?

It very much depends on what you see as the most important aspect of cryptocurrencies. There are potentially some merits in allowing crypto to be regulated. Volatility and high speculation mean you can easily lose your investment as quickly as you earned it, and many exchanges lack the infrastructure to keep up with demand, which hurts a coin’s scalability. If staying out of government hands is the only reason you embrace crypto, you may see volatility as a price worth paying. If you see it as an investment that you would like to benefit from financially, you may prefer some regulation.

What is certain right now is that nothing is certain. Such luminaries as Chang Peng Zhao they have made it clear that there have been flaws in crypto and there will continue to be others. If and when the crypto image settles on something more consistent, there will be winners and losers.

What happens in regulation, particularly in the most powerful economies, will largely decide who wins and who loses.


RECOMMENDED READING: US to Accelerate Stablecoin Regulations and Deliver Recommendations in “Coming Months”


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