He calls for regulation For cryptocurrencies they are beginning to hit their peak, so it is almost certain that the SEC and other government agencies will soon usher in what they see as order in a chaotic industry. One element driving this call for regulation is the instability we see in various trading platforms, such as the collapse of FTX, in recent months. Another justification for taking drastic measures is the view that it is necessary to prevent them from being used to aid the commission of illegal activities. Regardless of the reasoning, the reality is that when it comes to cryptocurrencies, regulation is useless.
Of course, it is indisputable that cryptocurrency, with the privacy it can bring to electronic financial transactions, has been used to aid a number of malicious activities, notably money laundering, but also terrorist financing, drug trafficking, drugs and other despicable acts. This should come as no surprise given that cryptocurrencies were created with the explicit goal of achieving decentralized financial systems, free from government interference and control.
However, that cryptocurrency can be useful in what are objectively terrible activities is not a reason to implement an onerous regulatory scheme on the industry and ignores the fact that illegal activity constitutes a minuscule part of its use. Related to this, those who push for strict regulations on cryptocurrencies to combat crime also tend to ignore how most illegal activities are regularly carried out using the more traditional financial instrument: money. It's just not accurate to call cryptocurrency particularly nefarious when $100 bills are still the preferred option for those who carry out criminal activities.
The logic behind requiring transparency for every crime-fighting cryptocurrency transaction could equally apply to all cash transfers, as it inherently stems from the authoritative belief that anonymity in financial matters should never be allowed. As would-be regulators begin to hatch plans to control cryptocurrencies, they would do well to remember that the main reason they exist in the first place is to provide privacy in e-commerce in a way that no other financial instrument can match.
Should new rules emerge that require users to give up that privacy, the result will not be compliance but defiance. The crypto world will simply innovate around the rules and rely on currencies and exchanges that are out of the reach of the US government, something they have already begun to do as the volume of requests for regulation increases.
A recent example of this innovation in action is money, a privacy-focused cryptocurrency that uses advanced technologies to hide transaction details and protect the identities of its users. Monero and other emerging cryptocurrencies like it demonstrate that the decentralized nature of cryptocurrencies can easily be maintained, or even exacerbated, in the face of government regulations. Cryptocurrency can simply evolve faster than regulations can contain, which means that your actions to shed light on it will ultimately only serve to drive the industry further into the dark.
So too, regulation will completely fail to bring stability to the cryptocurrency market. This is due to the fact that, as noted above, cryptocurrency is philosophically based on the libertarian principle of decentralization. If the government ignores that and asserts an authoritarian structure to exert control over it, the cryptocurrency would lose what is arguably its characteristic that defines that makes it more attractive to many of its users. Far from taming the market, instituting privacy-killing regulation in the cryptocurrency industry is much more likely to cause its biggest crash yet.
Furthermore, despite the fact that the cryptocurrency industry is experiencing multiple accidents over the years, not once has it leaked into the broader economy. The instability of that market poses no real threat to anyone beyond those who voluntarily enter knowing full well its volatility, again undermining any claim that there is a pressing need for drastic action. Even the sensational failure of cryptocurrency exchange FTX is no reason to justify new regulation in the sense that existing criminal laws, particularly those dealing with fraud, are perfectly capable of bringing these criminals to justice.
Rather than fight new developments by implementing what will inevitably be self-defeating regulation, government officials should first take active steps to better understand blockchain technology and the culture of those who support it.
Nicholas Creel is an assistant professor of business law at Georgia College and State University. Gavin Incrocci is an undergraduate student at Georgia College and State University studying cryptocurrency and cyber law with Professor Creel.
The views and opinions expressed in this comment are those of the author and do not reflect the official position of the Daily Caller.
