The Much Needed Regulation of Blockchain Networks

Capital Markets CIO Outlook | Friday, August 31, 2018

The surge of Bitcoin and similar cryptocurrencies witnessed mixed opinions among the masses. Whether criticized or applauded, the trend of using digital assets for monetary exchanges became the highlight of 2017. With the growing popularity, one question that plagued the minds of investors is the type of regulations that are put in place to govern the blockchain technology itself. Consider Ripple, a very well know centralized ledger offering lower mining fee. Despite this advantage, one of the major concerns was that regulators could increase the mining fee at any instance of time, quite possibly affecting the participants who majorly rely on micropayment. These contrasting trends have even made crypo transactions illegal in most countries, as the regulatory authorities could decide upon changing the governing rules of the blockchain based on their requirements.

No wonder there is a huge uproar for the regulation of digital assets among many nations worldwide. However, what regulation could mean to cryptocurrencies is yet another question of pros and cons. Investors believe that taxation of cryptocurrencies, post any national regulations, could cause a significant backlash as many of them would like to stay away for the record book. Similarly, another major hurdle is addressing exchanges and custodianship of these currencies. As most exchanges hold their customers’ private keys to increase the liquidity coins, the safety of these currency exchanges again poses a serious threat. Similarly, more than decentralizing an asset, the governing rules by which a commodity is altered with the passing of time makes or breaks investors’ interest in these assets.