As the cryptocurrency market continues to oscillate in a narrow band, governments across the globe seem set on regulating the industry. Yet, most proposed solutions fail to account for the realities of the situation. The tech sector has proven itself notoriously difficult to regulate – and cryptocurrency is a level beyond. Considering blockchain technology exists specifically to avoid centralized control, there are little governments can do – beyond blanket bans and taxation.
China chose the former, issuing a ban on most cryptocurrency mining operations. Ostensibly, this is part of their long-term plan to reduce carbon emissions. However, given the nation’s spotty history with the cryptocurrency industry, it’s unlikely that this occurred coincidentally alongside the market’s recent spike in price. While it appears that most of these exiled miners have found new homes, the market remains shaken by their sudden exodus.
Proposed European Regulations
The European Union appears the closest to the true regulatory framework – revealing their Markets in Crypto Assets regulation. The proposed legislation would require any new project to submit their white paper and establish themselves as a legal entity in one of the member states of the EU. While this may impact larger market cap coins and legitimate projects, it is unlikely to turn the tide of ambitious small-cap coins in niches like decentralized finance.
The United Kingdom also sent Binance users into a frenzy recently – producing a confusingly worded statement. While it does not appear Binance is banned from servicing U.K. clients, they are not authorized to operate within the U.K. This haphazard approach to regulation has more in common with the United States’ approach to cryptocurrency, rather than the European Union. Binance has since been hit with similar regulations in Italy, Hong Kong, Lithuania, and more.
A Disjointed Response from the United States
Since cryptocurrency’s inception, the United States has offered a confused and often contradictory regulations. Congress does not appear to have any appetite for producing cryptocurrency-based regulation, leaving individual states to regulate as they so choose. Some states, such as New York, have cracked down to a high degree on all cryptocurrency offerings. Others, such as Wyoming, have fully embraced the new technology.
At the federal level, some agencies – including the Federal Reserve – have taken note of the potential instability that could be caused by cryptocurrency’s ascension. The Fed flagged cryptocurrency as a concern but made no suggestions. In contrast, Treasury Secretary Janet Yellen remarked that the framework for proper cryptocurrency regulation simply does not exist yet – and would likely require a new agency or significant inter-agency cooperation.