Cryptocurrency has been around for over a decade now, but there is still a significant knowledge gap when it comes to understanding the technology. Even policymakers who are responsible for regulating the industry often lack a basic understanding of how it works. This lack of knowledge can be risky, as cryptocurrencies are powerful and have the potential to destabilize the economy if not managed properly.
The UK parliamentary committee recently proposed that cryptocurrency be regulated as gambling, but this idea was quickly rejected by the Treasury. While this may not be the best solution, it does recognize the human effects of cryptocurrency. Some people have been affected by crypto-specific advertising and have lost a lot of money. If crypto trading was designated as gambling, platforms could face additional licensing rules, requirements to protect vulnerable users, stake limits, and closer control of advertising.
However, Gavin Brown, associate professor in financial technology at the University of Liverpool, believes that cryptocurrencies are very different from gambling and should not be regulated as such. Cryptocurrencies are decentralized and cannot be controlled or banned in a traditional sense. They have been deliberately constructed in a way that is anti-state and almost naturally beyond the reach of regulators. While there are downsides associated with cryptocurrencies, such as nefarious use by criminals, they are not the same as gambling.
There are thousands of different cryptocurrencies, with Bitcoin being the biggest. Trying to regulate them is anything but simple. Larger crypto companies are centralized, meaning they are traditional companies with shareholders or a board of directors. But the same is not true of cryptocurrencies, which are decentralized. Literally, Bitcoin is an idea. It’s a computer program that’s being run globally all over the world at the same time.
The more a population uses alternative currency, the more difficult it becomes to control its economy. If people aren’t using traditional currency, then governments’ control over their economy is weakened. This is why governments must have an effective digital strategy to manage cryptocurrencies. While crypto itself might be extremely difficult to regulate, the same is not true of the people and companies who interact with it. Companies that offer cryptocurrency banking, prime brokerage, custodianship, or financial advice can be regulated as traditional companies.
Cryptocurrencies are not going away. They have come a long way in just 13 years, and their use is only going to increase. Governments cannot afford to get left behind and must take steps to manage the industry effectively. While there are risks associated with cryptocurrencies, they also have the potential to offer an alternative payment method to traditional money. It’s up to policymakers to ensure that this potential is realized while minimizing the risks.
Headings:
– Lack of Understanding of Cryptocurrency
– Cryptocurrency as Gambling
– Cryptocurrencies are Decentralized
– Risks Associated with Cryptocurrency
– Governments Must Have an Effective Digital Strategy
– Cryptocurrencies are Not Going Away
