4 Key Questions for Cryptocurrency Regulators

Cryptocurrency is still the hottest topic of discussion right now in consumer security circles.

Recently, there’s been more conversation than ever about the regulation of cryptocurrencies. While some people who are ideologically committed to crypto as a political project still resist it, most people in the know think it’s just a matter of time. That, as one article put it, “the writing may be on the wall” regarding regulation.

So, what’s that regulation going to look like? Here are some key questions that need to be answered.

How Can Regulators Protect “Mom & Pop” Investors?

The possibility of accepting crypto as a payment alternative requires contactless payment portals and other hardware that might be cost-prohibitive to some smaller businesses. Aside from this, there are several questions revolving around the digital wallet landscape that have yet to be defined regarding crypto’s long-term viability for small investors. 

Digital asset regulation will likely address these crypto exchange and digital wallet issues by proposing licensure to attain and deploy cryptocurrency as a fungible currency. This would assist “mom and pop” shops by increasing protections against market instability and encouraging the growth of the stablecoin exchange.  

Are They Securities or Commodities?

Generally speaking, the SEC regulates securities, and the CFTC regulates commodities and derivatives. There is still some debate about how to define crypto in either case since the subcomponents of the crypto landscape chafe under the concept of regulatory division. 

On that score, the SEC weighed in, arguing that nine specific tokens could be labeled securities, whereas a federal judge recently ruled virtual currencies like Bitcoin should be considered commodities. 

Whichever way this plays out, is highly dependent on which regulatory bodies are introduced into the equation, and when that happens. In other words, this is a “remains to be seen” situation. 

Does Cryptocurrency Have Staying Power? Or is it a Fad?

Honestly, within such a tremulous and volatile market, any conversation revolving around the long-term viability of cryptocurrency rests with the concept of regulation. Stabilization of the market is step one for anyone proposing to promote the market as a genuine currency, and without it… these conversations are purely hypothetical. 

Whether or not cryptocurrency could become a fixed entity in international payments, depends on how fast, how stringent, and how comprehensive regulatory measures may or will be.  

Does it Help—or Harm—Financial Inclusion Efforts?

Again, it depends. If “mom and pop” shops leap into crypto now, they would be essentially exposing themselves to the least regulated and most volatile market in the world. While there seems to be many benefits to inclusion, there can be little legitimacy from a long-term fungibility perspective without regulation.

That said, the longer the regulatory arguments draw out, the more uncertain crypto’s future will be. If crypto is to be the currency of the future, only regulation and time will tell.