With the second rise of cryptocurrency earlier this year, Bitcoin has attracted much attention. Investors have been racing to get a piece of the decentralized form of currency when it spiked earlier in 2021. A popular crypto trading platform, Coinbase, $COIN, even launched its IPO and is listed on the NASDAQ exchange. This rise has attracted much observation, and nonetheless, the U.S. government is looking to get involved. When president Joe Biden signed the $1.2 Trillion infrastructure bill into law on November 15th, part of that law was ensuring the SEC, or the U.S. Securities and Exchange Commission, will enforce more regulations on the little-understood form of currency. What are some potential pros and cons?
Some people who are pro-regulation state that SEC regulations will guarantee investor protection. Meaning, if Coinbase is hacked and investors lose their money, the government could guarantee investor's money back up to a certain amount. Another reason is that strict regulations could prevent tax evasion, money laundering, and prevent illegal financing of terrorist and criminal activities.
The voices against the regulation of the cryptocurrency market state that regulations goes against the point of cryptocurrency. It is a decentralized form of currency, after all, meaning not one single entity can have a grip on all transactions taking place. Cutting out big banks is part of the culture. With Coinbase, an investor can trade his or her crypto at any point in time to whoever their heart desires. An investor does not have to get a banks approval, signatures, authorizations, wait until the bank is open, etc. Utilizing cryptocurrency is more private this way. Another con would be preventing the innovation of cryptocurrency. As we have learned in class, heavy regulations slow progress, and it can take a very long time to start new ideas, businesses, programs, etc. Coinbase’s program Lend was already shut down after the SEC threatened to sue Coinbase. Cryptocurrency has and will continue to heavily disrupt the finance industry, specifically big banks, so it makes sense that the banks are pushing for heavy regulation.
There are some innocent pro’s and con’s to both sides of the argument. However, whenever the government gets involved into anything, as history has shown, it takes a turn for the worst.
This was very interesting to read! I don't know too much about cryptocurrency but from what you said, it made me realize how much it can hurt banks. While there is benefits to it, to me it's still not exactly a stable currency. And usually when the government gets too involved into anything, like you said, there is bad consequences. We need to have our own rights and be able to have a secure finance industry without it being disrupted by cryptocurrency.