Why Is Cryptocurrency Regulation Taking So Long?

Cosgrove Gaynard Solicitors

There are natural skeptics when it comes to emerging technologies and their potential, and blockchain is no exception. Even though there are more high-profile individuals that believe that blockchain has massive potential than ever, that doesn’t mean that there is necessarily a clear regulatory framework for cryptocurrencies as of yet.

The United States isn’t the only country grappling with the issue, as UK lawmakers recently have described the crypto space as a “wild west”, suggesting that some obvious decisions had to be made, and soon. While Ireland has certainly taken some steps with regards to cryptocurrency regulation, many wonder how long it will take for concrete regulation to exist in Europe in general.

Of course, while cryptocurrency enthusiasts want some kind of instant regulation - the truth is that the decision has to be a careful one. When one considers that Bitcoin was once approaching $20,000 and is currently (as of press time) hovering below $4,000 - it’s easy to see how lawmakers are uneasy about the volatility involved. While every investor ultimately has to take the risk for himself or herself - no lawmakers want to end up being the face of legitimizing markets where individuals lose massive amounts of money. As a well-known UK politician put it plainly: “This unregulated industry leaves investors facing numerous risks.”

One superpower where there is certainly some confusion is the United States. There have certainly been some setbacks as of late for both long-term cryptocurrency investors and even traders who bought during the bull run of 2017. For example, many believed that the Bakkt launch would be a major catalyst for both mass adoption and institutional money flow, but this launch has been delayed until later in 2019. For those that are unaware, Bakkt aims to be the first fully-regulated crypto trading platform, that would include futures trading, and will be launched by the parent company of none other than the New York Stock Exchange, in partnership with Microsoft and Starbucks, two of the most respected companies in the world. There were many that believed that this would be a catalyst for Bitcoin’s price to continue to grow, which usually affects cryptocurrency markets in general. This has not happened. As if that wasn’t enough disappointment, the fact that a Bitcoin ETF still hasn’t been approved by the Security Exchange Commission (SEC) has been a letdown. While the SEC has previously rejected proposals, it recently rejected nine proposals in August of 2018, which clearly hurt investor confidence.

Interestingly enough, there was one individual at the SEC who believed that this was the wrong decision. This individual is none other than Hester Pierce, who has since been dubbed “The Crypto Mom”, and ever since she has publicly spoken about how she believes that a Bitcoin ETF should be approved. The cryptocurrency community has rallied around her, and have analyzed her every move. Her Twitter following has even increased dramatically as a result. Does she have any answers? Peirce, was recently interviewed by Breakermag. She made a couple of points clear. First, she doesn’t own any cryptocurrency, and believes it would be inappropriate for her to do so, considering that she works at a regulatory agency that makes decisions that could affect the actual markets themselves.

Peirce makes it very clear how big of a decision this is. She stated that crypto is “something that all of us at the commission are being forced to grapple with now.” While Peirce certainly isn’t the sole decision-maker at the SEC, she does seem to understand that people are currently being limited, and she doesn’t appreciate that. She points out that the agency should be able to help investors make their own decisions, rather than make decisions for them, and that the SEC shouldn’t be acting as a “merit regulator”.

When one considers the fact that a Bitcoin mutual fund already exists in Canada - it does beg the question whether the United States will ultimately be late when it comes to crypto?

There are all sorts of countries that are embracing cryptocurrency rather than avoiding it. One obvious example is Malta. For example, the prime minister of Malta, Joseph Ducat, even spoke about cryptocurrency at the U.N. General Assembly, which shows just how dedicated the country is to actually becoming the “Blockchain Island”. In fact, he called crypto “the future of money”. Ducat even recorded a Youtube invitation to the Malta Blockchain Summit.

For those wondering about Ireland’s place with regards to the cryptocurrency - consider this, one of the most important cryptocurrency companies in the world, Coinbase, has opened an office in Dublin, presumably because of Brexit.

It is clear that the SEC is trying to grapple with the issue of allowing for innovation while still respecting the fact that investors have to be protected from fraud. When one considers that there are many exit scam projects in the initial coin offering (ICO) space - it’s easy to see why the SEC would want to cover its bases. In addition, Peirce points out that the law has to be respected, even in the context of emerging technologies. She stated: “We have a whole body of law on the books that’s been on the books for a long time. I think there’s a real need for us to try to wrestle with how existing law applies to this new space.”

Overall it is clear that some kind of framework is needed soon. We all know that a regulatory framework means that the markets can truly go forward.  Of course, time will tell how things unfold.  While it is clear that there are countries that are still trying to figure out how to regulate cryptocurrency, whether it’s the United States or the UK, one thing is for sure:

Ireland, thanks to Brexit and the uncertainty surrounding the British pound, might benefit greatly, and very soon.

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