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How Regulation Will Ultimately Kill Bitcoin

The crypto market is in shambles following a $30 billion drop in total marketcap. It has since recovered some but not enough to erase the question of whether Bitcoin can survive. Bitcoin has encountered multiple price dips in the past and recovered quite successfully every time. Therefore, it is safe to assume it will do so this time as well. However, market fluctuations, scams, or scaling limitations are not the principal danger to Bitcoin; but regulation is. Regulation is capable of doing what competition, FUD, and 51% attacks are unable to do. To put it in a locked box or control it using the law.

The Idea

Bitcoin is a survivor. Its technology is malleable and highly adaptable to change. The proof is in the growing number of crypto currencies in existence. Each one represents a unique or modified idea or application using crypto technology. All sharing in the same ideology of decentralization; devoid of control, censorship, alteration, yet fully transparent.  However, powerful financial institutions directly threatened by crypto’s objectives are using legal pawns to gain control of Bitcoin.

Freedom

Bitcoin fanatics believe that the market should not be regulated; instead, it should be left alone or self-governed. However, Mt. Gox, CoinCheck, Bitgrail, and most recently the Oyster protocol, show time and time again that without regulation, the market is vulnerable to hacks and price manipulation. Therefore, it has taken time, but each day, more voices clamor for some form of control. Most of the voices are institutional investors that are eager for stability so they can enter the highly profitable crypto market.

Regulation

Ultimately, financial interests are getting their wish. Regulation is coming, and in a hurry. In the US, the New York Department of Financial Services (NYDFS) issues a “BitLicense” to any entity that complies with a crypto-based legal guidelines. Companies like Coinbase, Gemini, BitPay, and others have been issued one. However, in the words of John McAfee “Regulation means control.” And that’s exactly what seems to be occurring when companies fail to comply with SEC and other govermental rules.

Enforcement

The SEC’s Enforcement Division announced that it is investigating dozens of ICOs, (likely exchanges, and individuals as well) for violation of securities laws. In a system called “Guidance by Enforcement” the SEC charges violators for failure to comply with vague and ambiguous regulations. Failure to comply can result in shutdown; such was the case for 1Broker and EtherDelta exchanges. And fines for Paragon and AirFox ICOS. All likely targeted by the SEC to set precedent for future arising cases.

Analysis

It is not farfetched to assume that regulation serves special interest groups. It eliminates competitors and guides crypto into the hands of those who wish to control it. And what best way to do it than by securing it in a bank’s vault. In this case, Bakkt, Bank of America, CitiGroup, and NYDIG. All of them sanctioned by the SEC as prospect custodians of crypto; Bitcoin in particular. The New York Dept. of Financial Services even awarded a BitLicense to the New York Digital Investment Group (NYDIG).

All regulation comes under the veil of protection to retail investors. Regulators cite proprietary trading, unsecure wallets, and manipulation as the principal needs for strong regulation. Unfortunately, institutions are winning the battle, converting developers like Franklyn Richards (Litecoin) into accepting that institutionalization of crypto is acceptable. And securitization and Regulation go hand and hand. Therefore, regulation is inevitable; and while Bitcoin will surely survive the current price volatility, at the end, chances are it will not survive regulation.

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