Crypto regulations are a popular subject in many governments right now. China and India are cracking down on crypto and now Ireland calls for crypto regulations as well. European Parliament member and Irish politician Chris MacManus believes that cryptocurrencies pose a risk to financial stability and is calling for government action.
“In recent times we have seen the volatility of crypto-assets as their value see-saws in the markets.
“Under my proposals, all new and existing crypto-assets will require authorisation by a ‘competent authority’ like the Central Bank.”
Regulation because of environmental concern
MacManus said that regulations are needed mainly for environmental protection:
“Crucially, in deciding whether to grant authorisation the competent authority has to take into account the environmental and energy impact of the proposal.”
MacManus uses Bitcoin as as the example for this environmental issue as most due. He mentions that Bitcoin uses the energy of both Argentina and Sweeden combined. However, he fails to mention that 75% of Bitcoin’s energy is from renewable energy. So, calling regulation for environmental reasons is illegitimate considing how cypto is becoming more enviornmentally friendly with proof of stake networks which Ethereum is to become later this year. Furthermore, the issue isn’t necessarily cryptocurrency but the failures of governments and institutions to develop cleaner energy. The flaw is not in fact rooted in cryptocurrency at all.
The problem with regulations
The issue with laws however, is that it leaves room for manipulation by governments. While MacManus claims that regulation is only to prevent harmful mining practices and environmental damage, the fact is that this is pro centralization. Having an authority granting permission for transactions is not the dream of most people in crypto.
MacManus also calls for a regulation of stablecoins. He stated:
“The EU has proposed regulation mainly in response to the planned emergence of so-called ‘stablecoins’- currencies run by Facebook or others that are linked to the value of the Euro or Dollar or other assets or currencies. These stablecoins are seen as having the potential to be significant enough to pose a threat to financial stability.””
MacManus says that, all crypto assets should require authorisation by “competent authorities like the Central Bank”. MacManus claims his issue with stablecoins is the lack of customer protection. According to Cointelegraph,”MacManus wants the EU’s crypto laws to mandate customer protection policies.” Customer protection is a fair concern to have. It’s one of the biggest issue crypto struggles with – and this could be an upside to regulation.
Regulations come at a big cost. Right now, the reason crypto is so profitable is because it’s a new industry. New industries are profitable because they lack regulation. In other words: crypto is in its “wild west” period. This makes the cryptocurrency industry an exciting space to be in, but it also brings high risks, scams and price volatility.
If crypto needs more regulation, it has to happen in a way that keeps it decentralized – if that’s at all possible. Decentralization comes with it’s costs like anything. Even though crypto isn’t perfect and has it’s downsides, regulation isn’t going to perfect crypto – it will just change it. And that’s not necessarily a good thing.
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Aaron is passionate about blockchain and has been an investor in cryptocurrencies for the past years. He enjoys engaging with other people in the cryptocurrency community online, particularly on Telegram, and learning from experts.