For a long time now, some experts in the industry have been calling for a clear regulatory framework that will govern cryptocurrencies on a large scale. Many believe that making the industry regulated will invite more institutional investors to the fold. However, not every expert believes that these regulations will be beneficial to the growth of the industry. There are those who believe that confusing regulations will reduce the pace and efficiency of this evolving industry.
Carol Goforth Speaks On Cryptocurrency Regulations
A law professor at the University of Arkansas School of Law, Carol Goforth, published a paper detailing the ill effects of making conflicting cryptocurrency regulations and putting typical US regulatory authorities incharge. She isn’t the first person to say something like this. Many others in the industry have spoken against giving a centralized body power of a decentralized system.
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In the US, the Internal Revenue Service regulates cryptocurrency assets the same way they regulate property. At the same time, the Treasury department regulates cryptocurrencies as money. On the other hand, the Commodities Futures Trading Commission regulates these same cryptocurrencies as commodity. Let’s not forget the SEC that considers most cryptocurrencies securities. As if the regulatory confusing isn’t enough, each state in the US has a different set of laws regarding the use of cryptocurrencies. While some have set clear and favorable regulations, others have set strict laws.
Carol’s point is that this lack of consensus has led to the creation of overlapping requirements and rules that do nothing but hamper the level of innovation within the industry. They are expensive, time consuming and prohibitive for the United States. There is also the risks of enforcement actions and investigations that drives many away from the industry.
What Is The Solution?
As a solution to these problems, Goforth suggested a paradigm shift. She said that the United States will is not likely to set a limit for industry jurisdiction of the bodies mentioned above because they want to consolidate regulatory power. Rather than creating an entirely new body to regulate the cryptocurrency industry, legislators will leave the current regulators of typical financial markets in charge. This is because they believe these ones have the necessary expertise to regulate the industry. Since the courts have given approval, things may not change for now.
So, how can these agencies regulate the cryptocurrency industry without hindering innovation? Well, one easy solution will be for all the bodies that currently have a say in cryptocurrency affairs to come together and make an effort to coordinate regulatory oversight and enforcement based on a nuanced approach. In her words:
“For a change in perspective to occur, a paradigm shift is needed. These bodies need to move away from seeing cryptocurrencies as one kind of asset or the other because, in reality, it isn’t a single kind of asset. When regulators in the United States realize this, they will be able to do something beneficial before it is too late.”
As long as there is no single, clear and favorable framework for the cryptocurrency industry, development will be stunted. Innovators and institutional investors will not want to penetrate an industry that doesn’t have a single definition but is being regulated as different things by different bodies.