"One Size Fits All" Regulatory Boot May Stifle Cryptocurrency Development
I've been mulling over the recent regulatory moves by various governments in recent months. I have drawn one very disconcerting conclusion that I want to share.
Right now cryptocurrencies are being treated as a "one size fits all" category of thing. In terms of what it is and what it represents it's being defined like property rather than currency. That's happened so far in the United States and with that precedent set there is the definite possibility that other countries could follow the same path.
This is a big detriment to the development of blockchain technology. If the numbers don't make sense, people won't use cryptocurrency as a currency. If you are forced to report every transaction like a capital gains loss or gain it's too cumbersome. Imagine tracking every purchase of food or clothing or children's toys every day, to see whether your fiat currency had gone up or down in value that day, and being forced to convey all of that at the end of the year in your taxes.
This line of regulation only makes sense for investments and if regulators forcibly drop all cryptocurrencies into that category, then in turn all developers and owners of those cryptocurrencies will be forced to see it purely as an investment. As an investment "supporting" the technology by buying/holding pumps the cryptocurrency up like a stock. That in turn leads to bubbles and bursts which is bad for the development of the industry.
We (consumers, investors, regulators, everyone) need to stop thinking of cryptocurrencies as being one category of thing. Let the ones who want to be seen as currency be seen as that and build a regulatory basis for it. Let the ones who want to be seen as a financial investment be seen as that, and apply rules and regulations in line with owning a stock or bond.
Right now the "one size fits all" regulatory shoe does not fit. Furthermore it's going to apply a stifling effect to the entire development of every existing and future cryptocurrency out there because they are slapped with regulations that will propel the technology to only be used in certain ways. This is a major problem for cryptocurrencies and until it is addressed, it will be a drag on any cryptocurrency that is trying to replace or serve as an alternative, to fiat currency.