Should Governments Regulate Bitcoin?

Friday April 29, 2022

Should Governments Regulate Bitcoin?
  (Source:Getty Images)

Are you wondering whether governments should regulate Bitcoin? If so, here's why some people argue that Bitcoin needs regulation.

Bitcoin has ridden the waves of market volatility and widespread interest for years. However, there's an unwavering reality that this virtual currency doesn't measure up to the benefits it promised users. Initially, Satoshi Nakamoto anticipated Bitcoin as a peer-to-peer network, efficient, and uniquely quick payment method. Also, Bitcoin could serve as a value storage.

However, Bitcoin presents sizeable risks to its users. Some people associate Bitcoin's creation and use with power concentration among a few owners and operators. Also, some associate Bitcoin with high market volatility, energy consumption, illegal transactions, and market opacity.

The unrealized rewards and risks are why some people argue that Bitcoin requires regulations. But despite these concerns, people and corporations continue to purchase Bitcoin. Others accept it as a payment method.

Although countries like China have outlawed Bitcoin, they have developed theirs or are in the process of doing so. For instance, China has a digital Yuan. People can now buy and sell this central bank's cryptocurrency via this Investment Portal. Such developments show that the world needs cryptocurrency despite the shortcomings of Bitcoin.

Perhaps worth noting is that the Bitcoin network is undergoing developments. The Lightning network is the most recent innovation, speeding Bitcoin transactions. Thus, the Bitcoin network participants are constantly improving the cryptocurrency's performance. Nevertheless, some entities still think Bitcoin needs regulations. Here's why.

Investor Protection

Some people think that price volatility and market manipulation are typical in the Bitcoin trading sector. For instance, Bitcoin rose to an all-time high price in 2021 before losing significant value the same year. Some people think the lack of regulation and authorized information on this digital asset could have contributed to these wild movements. Also, Bitcoin has technological complexities that make its control vital to safeguard investors.

Combating Crime

Bitcoin presents challenges and opportunities as a new payment method and investment. People and institutions can use Bitcoin for more efficient, secure, and convenient international payments. Also, this virtual currency eliminates cumbersome security and operational process that people associate with conventional money. And this improves economic efficiency at a global level.

But as ordinary people buy Bitcoin and institutional investors include them in their portfolio, the growing prevalence brings questions about preventing money laundering, ensuring financial stability, and preventing its use to fund terrorism.

Consequently, some people think Bitcoin needs regulation to combat crimes that a few actors may commit using this virtual currency. Ideally, financial regulators should work with technology experts to develop laws that keep up with this innovation without interfering with Bitcoin's functioning. Thus, regulators should be forward-thinking to create rules that serve the purpose rather than interfere with Bitcoin.

Clarification

Many countries are yet to declare Bitcoin an asset or a currency. And this presents challenges when people trade or invest in Bitcoin. For this reason, some crypto experts argue that many people in the industry want regulations. The federal government hasn't provided clear guidance on Bitcoin or crypto regulation. Therefore, many industry leaders can't build or establish platforms with certainty.

Most entities agitating for Bitcoin regulations are seeking clarity that encourages innovation. Also, they want to enjoy state protection and rules that establish a level playing field. Some experts argue that Bitcoin would react positively to laws or frameworks that help players innovate. Nevertheless, governments should refrain from introducing stringent laws that may hinder innovation in the crypto industry.

Final Thought

Satoshi wanted Bitcoin to be free from government interference or regulation. However, some entities feel that the cryptocurrency will function better with a law to regulate it. Nevertheless, the Bitcoin protocol makes its regulation or control by a central authority difficult. Thus, whether Bitcoin regulations will work or not is a matter of time.