Cryptocurrencies: Death by Regulation Strangulation
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A few Harvard professors feel that Bitcoin, and other cryptocurrencies, will soon be a thing of the past as regulation efforts increase.
With Bitcoin reaching $20k on some exchanges in December 2017, it’s hard to believe that it ever traded at laughable amounts like $5 in the years following its creation.
Now there may not be a time machine on hand to take us back to purchase bitcoins at a cheaper price, but according to a few like-minded Harvard professors, we won’t need one! The Harvard Crimson reported that these experts believe that due to its unsustainability and the increase in regulation efforts, Bitcoin’s price will eventually drop to new lows before disappearing.
Economics professor Kenneth S. Rogoff, who is also a cryptocurrency expert, believes that Bitcoin has its “near-anonymity” feature to thank for its high value. Because of this, the currency has been, and is seen as, the ideal medium of exchange to bankroll illicit undertakings such as drug dealing and unlicensed gun sales and purchases.
No Invisibility Cloak for Bitcoin
However, as government institutions pursue more aggressive regulation efforts, this high level of anonymity is under serious threat. Rogoff believes that anonymous Bitcoin users may soon be a thing of the past. He explained:
Small anonymous transactions with virtual currencies would be desirable, [but] large-scale anonymous payments would make it extremely difficult to collect taxes or counter criminal activity.
Touching on Japan’s legalization of Bitcoin as a medium of exchange, Rogoff cautioned the risks of this adoption, which he says could result in the country “becoming a Switzerland-like tax haven, with bank-secrecy laws baked into the technology.”
Government Needs to Relax
Not all of Rogoff’s colleagues are of the same opinion, however. Jeffrey A. Miron, a libertarian economist who is also a professor at the university, had this to say about the assumption that Bitcoin is riskier than traditional fiat currency due to its lack of a paper trail:
We’ve seen the transformation of all sorts of industries from being on paper or in some physical unit to being all electronic, and nothing bad has happened. Indeed, a lot of good stuff has happened.
Miron went on to add:
There’s no reason the government should be concerned about means of payment that are not regulated by the government.
He also rubbished claims that Bitcoin is the go-to currency for drug dealers, saying that government-issued currencies were used “for centuries” before Bitcoin was even created.
However, Miron does believe that excessive regulation could spell the end of cryptocurrencies:
It [government] could let cryptocurrencies peacefully exist, and not accept them as a means of payment, and that’s what I think it should do. But my guess is that sooner or later, governments are going to regulate cryptocurrencies out of existence.
Rogoff also added his thoughts on the matter:
What the private sector innovates, the state eventually regulates and appropriates.
A New Era of State-Run Cryptos
In addition, Rogoff believes that central banks will create state-controlled virtual currencies and will “use regulation to tilt the playing field until they win.”
Based on the continued interest in these state-operated digital currencies, this year could see a dramatic increase in these developments. Venezuela will soon be issuing its Petro, Russia has plans for a CryptoRuble and Israel is also hoping to create a digital shekel.
It seems as if instead of embracing decentralized, albeit disruptive, currencies, governments will try to centralize the industry by issuing strong regulations, while simultaneously taking advantage of the benefits of blockchain by developing their own cryptos.
Do you think excessive regulations will end cryptocurrencies? Or will they continue to increase in value despite this? Let us know in the comments below.
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