The core reason why crypto regulation is taking so long and why there is probably still some time before we see any clear regulation or guidelines regarding it, is due to 4 key factors.
- It’s still new and not well understood.
- It’s a singular technology but has an extensive array of use cases.
- Up to this point, all ‘cryptocurrencies’ have been grouped together.
- Due to how opensource the technology is, it’s still rapidly developing and evolving, much like the internet in the late 90s and early 2000s.
In order to properly regulate crypto, it can’t all be thrown together and then regulated the same way. It has to be split up into sectors and then regulated based on how it’s being utilized.
Why Can’t All Crypto Be Regulated The Same?
Crypto is a tool and it can be utilized in a variety of ways, and in a variety of industries. Take a look at the internet, for example: it has an array of use cases. From transferring and storing data, to commerce, to media, to interactivity, and even virtual experiences ( often in the form of gaming ).
Let’s dive a bit deeper. Two differently regulated business models that utilize the internet are:
Banking: regulated by federal agencies such as OCC FRB FDIC
Insurance: regulated by state regulatory agencies
Both are part of the broader financial industry, and they are both industries that utilize the internet – sometimes even in similar ways – but they aren’t regulated by the same government agencies. This is because although they may use some of the same technology in providing their products and services, they are fundamentally different business models with the need for different regulatory guidelines.
Because crypto is so new we tend to group it all together into one thing. For example, if someone mentions Bitcoin, Ethereum, or USDC, many people think of them all as virtually the same thing.
This is a mistake because they are totally different, here’s how:
Bitcoin is a digital asset built on a decentralized “peer to peer electronic cash system.”
Ethereum Is an open-source network designed to run smart contracts and decentralized applications.
USDC (stablecoin) is a cryptocurrency designed to be a fast and secure medium of exchange that mitigates the complex, time-consuming, and expensive banking and cash settlement process.
The Potential Ways Crypto Will Be Regulated
Getting down to it, since we’ve established that there are major differences between ‘cryptocurrencies’ we now have a better idea of how they need to be regulated accordingly. What would the categories maybe look like for dividing the industry?
Theoretically here’s an idea of what it could look like:
Crypto Property: cryptos used as digital property, a store of value, and for bartering, such as bitcoin.
Crypto Currency: stablecoins, aka cryptos that are backed by a currency or commodity.
Crypto Securities: cryptos issued to raise capital, give ownership in a network, or be part of a DAO.
