Bitcoin was created so that it could function without the approval or authorization of any government. It was created precisely so that it would exist outside of the regulated banking space. Sending and receiving bitcoin does not require formal identification, and there are no restrictions on how many addresses one can own or how those addresses are used.
In some ways, this is great. Bitcoin allows for individuals that were perhaps unable to get proper banking services due to their lack of having formal identification, or for their inability to get to a banking location to open an account to get critical financial services. Further, cryptocurrencies like bitcoin allow for an enhanced degree of privacy when making transactions. While this is all well and good, the situation is far from perfect. And that is in part because Bitcoin lacks sensible regulation.
Bitcoin and other cryptocurrencies currently exist in a legal gray area. A handful of countries have actually made cryptocurrencies illegal (Egypt, Bolivia and Nepal to name a few). But, most countries, including the United States, currently treat bitcoin as a form of property. Since it’s not viewed as currency, this significantly restricts how cryptocurrencies can be used and interacted with by businesses large and small, financial institutions, investment firms, and so on. For instance, it’s conceivable that many retailers are choosing not to get involved with cryptocurrency in part due to lack of legal clarification and fear that getting involved with crypto could be a lot more trouble than it’s worth. That’s just our speculation, but it’s quite likely to be true.
So what is the next step to help cryptocurrency get over this current roadblock that’s impeding development? The answer to that is smart and transparent regulation.
To some crypto maximalists, regulation is something of a curse word. It brings to mind images of jackbooted thugs kicking down doors. Further, the word regulation suggests increased scrutiny on cryptocurrency transactions and the destruction of easy-access privacy. But are these fears founded?
At Celsius, we believe that regulation will happen whether we want it to or not. The only way that crypto won’t be regulated is if the entire ecosystem were to disappear, thus precluding any need for regulation. But as adoption becomes increasingly widespread and use cases multiply, regulation becomes inevitable. So instead of trying to frame regulation as a sort of boogie man, it’s better if we collectively lean into it and guide it in ways that are productive and beneficial to all parties.
Let’s think about a few of the ways that regulation could benefit cryptocurrency and its users. First and foremost, regulation would mean acceptance and clear definition. This may not sound very exciting at first, but it would fundamentally change the way that businesses, banks, and financial institutions could interact with cryptocurrency. It would stop the current chilling effect we are feeling due to the vagaries of the law as it stands. Businesses large and small that have had their eyes on cryptocurrency can now dive in head first, fully confident that they understand the consequences and benefits of what they are doing.
Clarity in regulation would lead to more and more investment products on stock exchanges and other investment platforms. It would almost certainly mean that investment firms wanting to launch their own ETFs (exchange-traded funds) that are based on cryptocurrencies would be able to do so far more easily than today.
Another potentially amazing effect of proper regulation could be the formalization of security tokens. In simplified terms, a security token could be essentially a stock or share in a company that is represented as a blockchain asset — such as an Ethereum token.
With security tokens, individuals would no longer need stockbrokers and other intermediaries to invest directly in companies. While security tokens would require ID verification, this verification could be done just once for a nominal fee, after which all subsequent trades could be done without the need for any outside interference. Compare that to today where major stockbrokers charge upwards of $15 or more per trade.
Third, it is entirely possible that ownership of significant assets like cars, real estate, or even businesses could be tokenized. In other words, given the proper regulatory environment, it could be possible to transfer the ownership of your car to someone else merely by sending them the blockchain token that represents your car. That would mean no more burdensome paperwork or trips to registration offices. Instead, selling your car would be as easy as transferring a token and handing them the keys.
Similar to securities tokens, some cryptocurrency projects aim to tokenize commercial properties and split them up into thousands of pieces. In these arrangements, ownership of any of these pieces would entitle you to potential benefits up to and including a share of the proceeds of the rental income earned by the property. In that way, it would be just like buying a dividend yielding stock, except that you would be owning a piece of an office building downtown.
The good news about regulation is that not all aspects of cryptocurrency would be under the thumb of a regulator. For example, if widespread bitcoin regulation occurs, there would be nothing stopping you from creating an address and sending and receiving bitcoin. Further, as the sheer number of available cryptocurrencies grows, it’s inconceivable that world governments would attempt to regulate all of them with a hands-on approach.
What this means is that if you want to interact with cryptocurrency in a way that’s out in the open and under regulated conditions, you are free to do so. Conversely, if you want to remain anonymous or live in the part of the world that does not have or need crypto regulation, you do not need to participate in that.
A reasonable metaphor for this is how the Internet works today. Most major Internet companies like Google and Amazon work closely with regulators and report everything that happens. Conversely, small Internet startups in countries that have few requirements for web-based business regulations are not subject to similar laws.
Looking further into the future, it’s entirely possible that individuals will be incentivized to use cryptocurrency through regulated channels. For example, your cryptocurrency activities could contribute towards something like a credit score, or otherwise be used to verify your savings or financial situation. It could also make paying taxes much easier, as automating all of your financial transactions could be done in seconds with all the information secured on a public blockchain. While using cryptocurrency outside of regulated channels won’t be illegal per se, you would likely not benefit from any of the advantages that come with regulated routes.
Here’s the bottom line. Regulation will allow for business and crypto to finally interact with each other without fear. It could bring in a new golden age of development the likes of which we have never seen before. Or, it could have minimal impact and things will continue as they are now, mostly unimpeded.
Either way, we think that smart, carefully written, and clear regulation could help cryptocurrencies grow and evolve into indispensable parts of all of our lives.
Celsius Network is a democratized interest income and lending platform accessible via a mobile app. Built on the belief that financial services should only do what is in the best interests of the community, Celsius is a modern platform where membership provides access to curated financial services that are not available through traditional financial institutions. Crypto holders can earn interest by transferring their coins to their Celsius Wallet and borrow USD against their crypto collateral at interest rates as low as 5% APR.
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