That cryptocurrency without regulation will lead to significant financial and social harm, globally.
This is similar to how the Dutch Tulip Mania created a market for unseen goods, where one could speculate and buy purely on confidence and trust, similar to the deceitful principles on which Tether operates. As Sam Bankman-Fried, owner of FTX, one of the largest cryptocurrency exchanges in the world, fearfully mentioned: “If you're a crypto company, banks are nervous to work with you”. His words shed light on the truth of unregulated crypto, as banks, which are forced to comply with centuries of regulation, are still reluctant to work with the billion-dollar digital currency businesses. The loss of trust in cryptocurrency is exemplified by the company Tether, being fined 18 million dollars in the US for misappropriating more than 850 million dollars from ‘reserves’. If a bank did this, it would be shut down, authorised personnel would be put into jail, and the world shun all those involved. However, in Tether’s situation, governments around the world decided to be ignorant of the cryptic situation, tacitly allowing their business to continue operating. This has, in turn, allowed Tether to build a 70 billion dollar business, that is simply, ‘too rich to stop’. We need strict regulations and collaboration by governments around the globe to cease cryptocurrency companies from infecting the global economy, and squandering their ‘trusted’ money in backdoor deals.
In addition, the boom of the unregulated cryptocurrency market has accelerated the development of online scams. They have become so prevalent that the term “rug pull” has been coined to group them. Basically, with many people in the world becoming overnight millionaires through cryptocurrency, the media’s obsession and continuous broadcasting of such instant wealth have gradually subsumed the desires of the general populace. Thus, an entire industry born out of a desire to ‘get-rich-quick’ poses new challenges in regulating such a fast-changing industry. Scammers have exploited such desires, by creating their own cryptocurrencies designed to appeal to the masses. These cryptocurrencies are usually based on viral trends, such as the notorious ‘Squid Game coin’, which defrauded over ten million US dollars from buyers. The coins heavily rely on the fact that the cryptocurrency business is unregulated, allowing them to safely scam individuals without exposing their own situation. Global organisations and governments need to take action and regulate the cryptocurrency economy by imposing ‘Know-Your-Customer’ KYC laws. This will lessen the opportunity for scams as individuals will be forced to expose their identity before attempting to defraud investors.
However, individuals argue that regulating cryptocurrency destroys the underlying benefits of online currencies. People prefer cryptocurrencies due to their fast transactions and the anonymity it affords. If the regulation were added, transactions would take time, and users would have to be identified and monitored. Proponents argue regulation removes the advantages of cryptocurrencies. This is true, but not all online currencies need to be regulated. Only certain coins critical to the stability of the cryptocurrency ecosystem, such as Tether, need to be regulated. Rather than trying to police an entirely deregulated system, it is more important to ensure the financial foundations of its largest operators are stable.
The Dutch Tulip Mania revolutionised modern financial systems, creating markets for ‘unseen goods’ and exponentially increasing the availability of loans to common citizens. However, with its inevitable collapse, hundreds of contracts were forced to be settled in Dutch courts, inevitably contaminating both the financial and legal systems. With 400,000 Bitcoin transactions happening each day alone, one must wonder how difficult it would be to manage a widespread, global collapse.
Comments