Ethereum co-founder Vitalik Buterin has voiced strong disapproval of the US regulatory framework currently governing cryptocurrencies. He argues that by designating cryptocurrencies as securities, it unfairly discriminates against them while allowing "useless things" with "vague potentials" to operate unchecked.
Buterin made his remarks in response to questions about the regulation of the cryptocurrency industry as a whole that were posed to him on the Ethereum network. The inquiry also considers whether additional steps should be taken to lessen the number of opportunists and increase industry safety.
The main issue with regulating cryptocurrencies in the US, according to Vitalik Buterin, is that the system favors assets with hazy claims of potential returns over those with clear and precise financial expectations.
Interestingly, he feels that when a project shows uncertain potential returns without well-defined plans, regulatory oversight is often avoided.
Conversely, initiatives that give clear explanations of the projected returns and the customer rights are likely to be classified as securities and come under stricter regulations.
The co-founder called this inconsistency in regulatory policies "anarcho-tyranny." Instead of establishing a rigid tyranny or complete anarchy, he suggested that it would create an incentive structure that would be harmful to the cryptocurrency industry.
He believes that because it stifles transparency and innovation, this structure is detrimental to the sector.
What is "Anarcho-Tyranny"?
Anarcho-Tyranny characterizes a state of affairs in which the government overregulates law-abiding, upright citizens, leading to tyranny, while failing to enforce laws against detrimental activities, resulting in anarchy.
This leads to a regulatory environment that is imprecise and unclear.
He also thinks that while projects that provide clear and transparent information are subject to strict regulations and are frequently categorized as securities, projects that make vague promises are allowed to operate freely under the current regulatory framework.
More so, he contends that genuine innovation in the sector is discouraged by this discrepancy.
Ethereum's co-founder expressed his desire for a shift in the laws that would promote openness and long-term value in the issuing of tokens.
He also claimed that cryptocurrency would benefit from this. Conversely, he suggests a system wherein issuing tokens in the absence of a clear, long-term strategy to maintain or increase their value is considered a riskier investment than offering such a strategy.
A reform proposal for regulations
Regarding his point, Coingape asserts that in order to effect such a change, regulators and the cryptocurrency industry need to interact in good faith and with true cooperation.
Buterin believes it would be far more advantageous to shift to a situation where issuing a token without a clear long-term plan for maintaining or increasing its economic value is riskier, and providing such a plan while following basic best practices ensures safety.
Furthermore, analysts in the cryptocurrency space claim that Buterin's remarks emphasize the need for a more well-rounded regulatory approach. Transparency and long-term planning within the Bitcoin ecosystem may be rewarded by this move. Furthermore, a lot needs to be done by the regulatory bodies to promote innovation.
Ultimately, the approval of the Ethereum exchange-traded fund for spot trading is a great starting point. And the SEC's move to rescind its earlier stance is a trend setting an example for other assets and suggests that the bar is moving in favor of cryptocurrencies.
A collaborative approach
The crypto sector, encouraged by Buterin, must join forces with regulatory authorities to develop the guidelines that will govern future cryptocurrency use and trade.
By working together, stakeholders can develop a regulatory framework that supports innovation while protecting investors. And as the crypto industry evolves, regulators around the world will play a crucial role in balancing regulations and innovation.