Cryptocurrency is often referred to as a Wild West of sorts. Both because of its founding principle of decentralization and its early adoption by smooth criminals (see: Bitcoin and the Silk Road). And, as it becomes more mainstream, it’s also coming under more scrutiny from local and federal governments. Example: New York state recently banned certain types of bitcoin mining. And more regulation is likely on the way. The Federal Reserve is researching crypto utility and President Joe Biden recently signed an executive order to explore crypto’s risks and benefits. But some argue that regulation goes against the principles of decentralized finance.
We spoke with Moe Vela, an attorney and former White House Senior Advisor to then-Vice President Joe Biden, about what crypto regulation could mean for investors. His answers have been edited for length and clarity.
theSkimm: Is crypto regulation antithetical to the origins of cryptocurrency?
Moe Vela: Early crypto adoption was a form of revolution. And it was a revolution that had a very loud and clear message: ‘The system isn't working for us. We feel left out. We're disenfranchised. We feel helpless and voiceless. We don't have access to the same wealth creation that others do, so we're gonna create our own system.’ And the power of crypto is in that community. It's in that network. But with that came the volatility that you're seeing in the turbulence today.
How can regulators help maintain that community while protecting investors?
Regulators have to engage in a balancing act, creating protection for investors who are not yet up to speed or who are fearful or unaware of crypto and how it works. But also empowering and encouraging people to get in once they learn about it and what it means. They need to create a regulatory environment that is welcoming.
How might regulation fall short of serving the spectrum of crypto investors, from beginners to professionals?
You can protect, but you have to also enable and empower. When regulators say they’re protecting the unsophisticated, the reason they're unsophisticated, in most cases, is that mere regulation keeps them unsophisticated. Sometimes regulation becomes intimidating. It becomes prohibitive. It creates fear. It tells you why you can't; it doesn’t tell you why you shouldn't. If you really want to protect the unsophisticated, you will teach them how, you will show them the way, and you will have created a pathway for them.
Could regulation help crypto avoid another crash, like the one that happened recently?
If this crash and the fact that some people lost all of their money and savings is not an indicator that there needs to be something in place, then somebody's just in denial. I prefer to advocate for reality. The reality is that there are nefarious actors in every industry and every sector in the history of the world. So what we gotta do is make sure that there's a regulatory environment that protects people from those bad actors, from people with bad intentions and nefarious activities. But we can't, in my opinion, scare people.
Crypto regulation could be beneficial for everyone, new investors and seasoned pros alike. But it can be difficult for legislators to toe the line between protecting assets and inhibiting growth.
Moe Vela is an attorney and former White House Senior adviser to then-Vice President Joe Biden. He serves on the board of TransparentBusiness and co-stars on the show Unicorn Hunters.
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