Regulators in South Korea, India, and the United States have shifted their regulation focus from attempting to ban cryptocurrencies to a lighter and more nuanced approach.
South Korean regulators will be announcing new proposed rules at an upcoming session of The National Assembly on July 13 to July 26. One regulator wants additional regulations on exchanges to prevent money laundering, cybercrimes, and data leaks, while another called for strengthening cryptocurrencies’ security measures. These desires follow the same path as the recent South Korean government’s announcement that they plan to reverse the ICO ban that was enacted in September of 2017.
India was leaning towards a blanket ban on cryptocurrencies just a few months ago, but the Finance Ministry has recently ordered a cryptocurrency study, which indicates that the government may instead treat cryptocurrencies like commodities. A senior Indian government official said that the government is mainly concerned with “where the money is coming from” since they want to make “sure that the money used is not illegal money” and “to track its source is the most important thing”. He added that commodity regulations would allow the government to “better regulate trade” of cryptocurrencies.
The United States is launching a “Task Force on Market Integrity and Consumer Fraud” to focus on areas of “particular attention” in anti-crime objectives, of which digital currencies is one area of attention. The task force will incorporate officials from many government agencies, including SEC’s Jay Clayton, whom has had a relatively favorable stance towards cryptocurrency regulations. The task force is charged with “provid[ing] guidance for the investigation and prosecution of cases involving fraud on the government, the financial markets, and consumers.”
The effects of a shift to lighter regulations
These recent developments demonstrate a shift by governments to a lighter regulation approach from the wide-spread bans that were discussed only a few months ago. The shift is motivated by many factors, but some common trends appear to be a desire to stop traditionally illegal activities that have always occurred with cash, such as tax and investment fraud. The change is also more realistic since attempting to ban cryptocurrencies, which can occupy almost any computer or phone across the world, would be a huge pain to execute and most likely futile. Instead, a focus on curbing already illegal activities is more realistic since it is applying cultural norms to new technologies. To execute these new motives, governments will most likely use a a plethora of tools such as exchange regulations, merchant regulations, and tracking of cryptocurrency addresses on the public ledger, as is currently being developed by researchers.
This light regulation approach will allow cryptocurrencies more growth than under a ban, which while futile, would still significantly impact adoption rates by making acquiring and using cryptocurrencies more time consuming and costly. Additionally, it has been shown that illicit activities are only an extremely small portion of cryptocurrency transactions, which means that most users will not be under direct threat from government regulations that aim to weed out illicit activities.
Nevertheless, government regulations, even if lighter, will still create additional costs and barriers for merchant and consumer adoption, as is the economics of regulations. Thus, this will create a larger incentive for decentralized exchanges to serve merchants and consumers at a lower costs. It also places an incentive on cryptocurrency networks to self-regulate to avoid government intervention.
The structure of Dash already disincentivizes fraud
Dash’s code is built with strong economic structures that incentivizes mutual benefits between all parties. Since Dash uniquely combines mining and staking from miners and masternodes, respectively, to operate the network, both parties are financially incentivized to ensure that the network operates smoothly and honestly so Dash continues to grow its long-term user base. The Dash treasury enables funding of various projects that further incentivizes quality services, which is less likely than with strictly voluntary work. Additionally, Dash’s PrivateSend feature is only optional and still places all transactions on the public blockchain, which further incentivizes the majority of Dash user to conduct non-illicit activities such as fraud.
The economic incentives mentioned above has led to the creation of Dash Help, Dash Force News, Dash Watch, and other services to benefit consumers with more information and knowledge. These parties aim to promote honest and helpful information to better inform consumers of the cryptocurrency space so they can build trust, keep consumers from being taken advantage of by fraudulent activities, and bring more users onto the Dash network. These activities mutually benefit all parties by increasing the utility of consumers and increasing the robustness of the Dash network. This makes even light regulations against fraud redundant for Dash, since the Dash network incentivizes merchants and consumers to look after one another.