Tesla CEO Elon Musk again waded into the cryptocurrency debate last week. This time, the eccentric billionaire vocalized his concerns about the US government regulating digital assets. Speaking at a Code Conference in Beverly Hills, California, the CEO of Tesla said: “It is not possible to, I think, destroy crypto, but it is possible for governments to slow down its advancement.” The best course of action, in his opinion, is to “do nothing”.
To regulate or not to regulate? This has been one of the questions plaguing policymakers across the globe in recent months. While some, like El Salvador, have chosen to fully embrace the brave new world of digital assets, others, namely China, instead prefer to impose a blanket ban on cryptocurrency transactions. But the majority, of course, find themselves somewhere in between these two extremes and frantically trying to fit digital assets into existing regulatory frameworks.
The question is, can cryptocurrencies even be regulated at all, let alone effectively? And if the answer is yes, is this good news or does it sound the death knell for digital assets?
The regulatory challenge
At face value, the idea of regulation doesn’t sit well with the concept of cryptocurrency. First established in 2009, Bitcoin, the first cryptocurrency, was an anti-establishment response to the Great Financial Crisis. More than a decade on, the decentralized nature of digital assets is still a key attraction for many, while regulation by its nature requires some form of centralization.
Undoubtedly, this has given the world’s regulators many a headache. However, that is not to say that the entire ecosystem cannot be regulated. As we have seen with the largest crypto exchange Binance, and later with decentralized exchange Uniswap, the authorities are still well within their power to throw their weight around in the digital asset space.
To recap, in July, Binance was forced to suspend withdrawals into fiat currencies in Pounds Sterling (GBP) and Euros (EUR). Uniswap, meanwhile, is being investigated by the US Securities and Exchange Commission (SEC), which is looking into its marketing and investor services.
READ: Is the US Senate trying to kill crypto?
As digital currencies firmly embed themselves in the mainstream, it is becoming clear regulatory scrutiny of the space will only intensify. The decentralized nature of digital assets simply means that this regulation must focus primarily on off- and onramps, and of course on the users themselves. We are now seeing this in action across platforms, for example with the introduction of more stringent Know Your Customer (KYC) requirements.
To regulate or not to regulate?
As such, digital asset businesses now face a dilemma. Remain fully decentralized and unregulated, but then possibly lose customers or be forced out of jurisdictions due to non-compliance; or become fully compliant and regulated and give up the benefits of decentralization. During one of our recent Fridays with YIELD App, Justin Wright, our group COO & CFO, explained that “the middle ground that people thought might be possible has very much disappeared, particularly over the last few months”.
READ: How does regulation impact corporate digital asset investments?
Yet while there are benefits to remaining fully decentralized and many don’t wish to see governments wield their power over cryptocurrencies, there are many advantages to complying with regulation too.
According to Justin: “Regulation brings the credibility that in time will attract more traditional, institutional capital. It is a good thing for the betterment of the ecosystem as a whole if it starts to strip away some of the malicious actors and other underlying issues with fraud associated with the industry, or even some of the technological risks."
Money to the masses
The reality is that for many, digital assets remain a new and foreign element of finance. In a world where just one-third of adults understand basic financial concepts, democratizing finance is no easy task. Even among those who do understand the concepts of saving and investing, digital assets are largely seen as esoteric or highly risky.
If regulation is in a position to remove some of this stigma and make digital asset investing safer and more accessible for all, then we must ask ourselves, is it really so bad to allow a centralized entity to keep an eye on the ecosystem?
READ: NFTs are bringing the mainstream to crypto in a way Bitcoin cannot
At YIELD App, we believe that working with regulators is the way to bring the wealth creation opportunities available in digital assets to greater numbers of people around the world. Our users must all be verified up to KYC Level 2 and we strive to be fully compliant with all regulatory requirements. We believe this will help us in our mission to bring the power of digital assets to everyone, everywhere across the world.
Undoubtedly, regulating digital currencies will be a journey, and like any journey, there will be potholes and hurdles along the way. In our view, regulation does not have to sound the death knell of digital assets. Instead, it has the power to finally bring cryptocurrencies into the mainstream.
Do you want to make up to 18% APY on your USDT, USDC, ETH? Sign up for a YIELD App account today!
DISCLAIMER: The content of this article does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up, and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.
