February 07, 2018

Whenever a new technology begins to make its way into the forefront of humanity’s collective attention, certain predictable patterns start to play, like dominoes. There’s a cycle that any sufficiently transformative technology will go through and some of the points on that cycle can be quite discouraging to those invested in it. Others can be quite scary for those who don’t yet understand it. Cryptocurrencies, and more specifically, the technologies they’re built on, represent a new player in this age old game. And it would appear to some extent that we’ve entered a phase of the cycle that might be referred to as the “regulatory scuffle” stage.

                By “regulatory scuffle” I mean the part in the story where governments and regulatory organizations around the world start to recognize the dramatic and disruptive potential of this new technology and hurriedly try to get their heads around what can and should be done in response. The last technology to begin this cycle was the internet. It started as an open playing field with next to no regulations or rules. It was a wild west. And in some sense, it still is, to a degree. At least compared to other technologies like television, the internet is still a bit of a free-for-all. But the internet started gaining mainstream steam back in the 90s and since then organizations that have reason to (the governments of the world, internet service providers, etc.), have made strides to regulate and temper it. If these terms are ringing any bells it’s most likely in reference to the most obvious and currently relevant example of this, the FCC net neutrality repeal fiasco. This event had an interesting side effect: now, more than ever, the mainstream public is intensely concerned with the technologies and utilities they have adopted into their lives and attempts to regulate them.

                And this is where cryptocurrencies come into the picture. Here we have a new technology that has massive amounts of untold potential and a new type of currency and value holding that has similar potential to disrupt and turn conventional economic paradigms on their heads. This reality has only just begun to be realized and we’re still at a point in the timeline of cryptocurrency and blockchain technology where the majority of people either barely know of its existence, don’t care about it, don’t understand it, don’t personally have an invested interest in it, or some combination of the four. But it’s gained just enough steam that it’s piqued the interest and tripped the nerves of governing bodies.

                Evidence of this has been rushing across the headlines of the past month. Taiwan is purportedly preparing regulatory polices for its booming cryptocurrency market. [1] Cryptocurrency has become so popular in Japan that a wave of new advertising campaigns have been implemented. The Japanese government for the most part has been extremely hands off in these affairs, but push back is beginning. [2] But just because regulatory organizations and powers are looking into cryptocurrency and taking an interest doesn’t mean all the news is bad. For example, the Singaporean government has reportedly been closely studying developments in the cryptocurrency market but has found no reason to prohibit or lockdown trading. [3]

                Perhaps the most pertinent event to occur in this vein is the recent meeting the SEC and CTFO had with the US Congress. It was then that they presented their long awaited official stance on cryptocurrency and blockchain technology. The crypto community held its breath in anticipation of potentially devastating sentiments of invalidity, disapproval, and concern.  Instead, to the surprise of some and relief of many, the statement was ultimately encouraging. “Cautiously optimistic” is the phrase most news outlets chose to go for. The caution comes in the form of warnings to investors to do their research and be wary of scams, and a stated desire to crackdown on fraudulent behavior in the cryptocurrency market, especially when it comes to ICOs. The optimism comes in the form of recognizing the potential in this market and blockchain technology for a whole host of utilities. This can perhaps be most succinctly summed up with this quote from the document itself: “The technology on which cryptocurrencies and ICOs are based may prove to be disruptive, transformative and efficiency enhancing.” [4]

                All in all, the race to regulate, monitor, utilize and embrace cryptocurrency has begun. Governments the world over have only just recently found this emerging technology and market impossible to ignore so what the ultimate stance these regulatory powers take has yet to completely shake out. And it will very likely vary from organization to organization, from country to country. On two opposite sides of the spectrum you have the lockdown of China and the ramped up interest and advertising efforts in Japan. The US senate hearing earlier this week set a positive but cautious tone for the US’s future involving cryptocurrencies. Regulation isn’t inherently a boogieman to be fearful of, but it’s most certainly a sliding scale that could slide too far. That’s why what we have to remember most of all now is that decentralization is one of the fundamental principles of cryptocurrency, just as it was with the world wide web, and holding on to that principle is going to be one of the keys to a bright future for cryptocurrency the world over.

  1. https://usethebitcoin.com/taiwan-regulate-cryptocurrency-market-future/
  2. https://www.japantimes.co.jp/news/2018/02/07/business/cryptocurrency-advertising-goes-big-japan-pushback-begun/#.WntR1a6nGUl
  3. https://www.coindesk.com/singapore-deputy-pm-no-strong-case-to-ban-cryptocurrency-trading/
  4. https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11

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