At a time when many investors, banks, regulators and government bodies see cryptocurrencies as being nothing more than a bubble that is set to burst at any moment, one professional believes that actually banning them is not the answer. Despite Bitcoin being fundamentally flawed, he believes that the innovation of blockchains and cryptocurrencies is actually too important, and therefore banning cryptocurrencies is not the answer.
Cryptocurrencies and blockchain technology is a completely new way of doing business. It is still a relatively new subject. Bitcoin is the oldest, and even that is only nine years old. This means that we are still learning how the technology behind it works, and how it can properly be implemented.
Because of this though, it means that in the coming years, it is likely that the market will stabilise - more regulations will be brought in, and people will begin to see the value of them. This should mean that the flawed products will disappear, as the stronger virtual currencies take over. This won’t happen overnight, and the flaws may never completely disappear, but they will become more accepted.
Many countries are completely banning the use of cryptocurrencies and exchanges, because of the risk of hackers. The trouble with this is though, as long as we are using the internet, there will always be an element of risk from hackers. The banning of this technology will not be what stops this.
So, instead of banning them, instead, we should be regulating and educating people on the benefits and what they can do for the wider community. The trouble is that the regulators are always one step behind. It takes so long for them to be implemented, the technology has then moved ahead, and they are behind again. This means that they can never prevent hacks, scams or phishing. Joachim Wuermeling, of Bundesbank said;
“Effective regulation of virtual currencies would therefore only be achievable through the greatest possible international cooperation because the regulatory power of nation-states is obviously limited.”
Again, global regulations take a while to implement them; however, there are two main areas that they can focus on; crypto exchanges and ICO’s. Regulations can force exchanges to comply with KYC-AML regulations, which prevent cryptocurrency being traded by people who are not allowed to do so. They can enforce exchanges to take the right security measures; however completely preventing the hacks is impossible.
Regulators should be focused on the ICO. These should comply with certain regulations to protect investors and keep founders accountable. ICO’s have great potential, so again banning them completely would be a terrible idea. What is needed is a global standard that should be developed for ICO’s.
Education is another area to focus on. Citizens should be properly educated about the risks that are involved and associated with cryptocurrencies. For example, Russia has announced that they will launch a programme designed to educate its citizens on cryptocurrencies and the dangers associated. If more countries followed this lead, it would help those to understand this new phenomenon.
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