Why Are Regulators Going After Cryptocurrency?

“China is expelling miners from its territory” (discover more here), "Indonesian central bank prohibits cryptocurrency as payment tool”, “The Netherlands is considering a bitcoin ban”. Such headlines appear on the internet too regularly and too quickly. Many countries issued a call for more rigorous regulation of the digital currency market. Some of them followed the example of the PRC and took radical measures. Why are central banks and other regulators often criticizing virtual currency? Let's try to figure it out today.

How It All Started

Neither governments nor regulators take bitcoin seriously for a crazy long time. No one believed that "the bubble that was about to burst” could affect the balance of power in global finance. Nevertheless, the crisis of 2020 forced people to look at usual things from another angle. The pandemic, which put the global economy on pause, highlighted the imperfections of the existing financial system as well as possible. What is more, it attracted new investors and technological players to the crypto market. 

MicroStrategy invested $250 million in BTC as a reserve asset in August 2020. A little later, a leading global provider of enterprise software platforms made several big purchases of bitcoins for a total of more than $2 billion. Elon Musk's Tesla paid attention to digital gold as well. American electric-automobile manufacturer invested $1.5 billion in the most popular cryptocurrency at the beginning of this year.

Regulators around the world couldn't just sit around and had to do something about it. Of course! Ignoring those events would mean losing the monopoly in the financial sphere in the future. Bitcoin is a technology for transferring value without third parties involved. In the classical economy, money movement occurs with the help of intermediaries. These are commercial banks. The central bank, in turn, is an intermediary for them. But as soon as a decentralized technology of money exchanging hands appears, the usual system becomes unnecessary (read how crypto wallets can make traditional banks a museum piece in our article).

How This Story Will End

According to 8848 Invest, the activity of regulators will diminish in the not-too-distant future. The current market conditions are not a reason for the speedy response of the global financial authorities. They only intervene when the virtual currency begins to play a more significant role than usual.

According to the service's analysts, we will witness an attempt to create international regulatory norms for digital cash in the next couple of years. However, they are unlikely to affect private blockchain projects. Crypto regulation is a dead end. Otherwise, a decentralized super-organism should occupy the same position as other forms of money, and this idea doesn't suit the major regulators' tastes. So, all plans to take over an alternative asset class will be limited to the norms of tax and criminal law.

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