Washington lawmakers and senior figures, including Janet Yellen, the treasury secretary, and Gary Gensler, the SEC Chair, believe more regulation is required in the crypto industry. But crypto enthusiasts remain fearful of excessive regulation since it could cripple the growing industry. Here are both sides of the debate.
Against crypto regulation
Many crypto investors are against more regulation seeping into the industry. Here’s why.
Regulation could put a damper on innovation
The crypto industry has grown sharply over the last few years, in part because of the broadscale use of blockchain technology. This tech guarantees a disruption of various industries, including finance. The decentralized way crypto businesses work often results in lower start-up costs for them since there’s no need to create a centralized infrastructure network. Another reason why the crypto industry has been doing well is that crypto companies are able to raise funds quickly without the interference of government bodies.
The crypto market may move to other countries
Since cryptocurrencies aren’t country-specific, virtual currency enthusiasts believe that strict regulation on crypto in the U.S. market would eventually push the industry to countries that are laxer. This might cause the United States to miss out on substantial economic benefits. It’s important to note that places like California and Miami are already considered crypto hubs and attract plenty of job seekers looking to pursue related careers.
It could make investor protection more challenging
Once crypto starts expanding to countries outside the United States’ borders, many experts believe that it would make it harder for authorities to control the activities of American investors and ensure any kind of protection. Rather than alienating crypto market investors by pushing hard regulation, it may be better to have a bird’s eye view of market sentiments and investor activities by keeping people inside the tent.
Pro crypto regulation
Those who are in favor of bringing in more regulation believe it will ultimately help the industry thrive. Here’s why.
Regulation can prevent tax evasion
Virtual currencies like Ethereum and Bitcoin, which are some of the most highly valued cryptos, offer investors and traders a way to evade taxes. Given this, many experts believe that the crypto economy contributes to the tax gap in the United States. Crypto tax evasion is primarily caused due to lax reporting standards. Since the IRS cannot trace every crypto transaction, especially if a crypto exchange doesn’t do a good job of reporting it, the income may go completely untaxed.
The crypto industry is unlikely to grow considerably without more regulation
Although the adoption of cryptocurrencies has increased substantially in the last few years, experts believe that the market has a long way to go. In fact, only a small percentage of the population in America owns crypto. Regulating the market will protect retail investors and encourage more people to start investing in crypto. This would undoubtedly help the crypto industry grow in the long term. Without clear regulation, it’s hard to be sure if one is in safe waters, and this could limit future growth.