Reasons Why Bitcoin Needs Regulation

Hitesh Choudhary on Unsplash/Creative Commons
Photo by Hitesh Choudhary on Unsplash

Bitcoin is becoming a global currency that some people in every country on earth accept. It’s also becoming a virtual currency that people use to complete cross-border transactions. Ideally, Bitcoin is the first decentralized currency in the world. That means it doesn’t have a single central repository location. What’s more, there’s no single party administering Bitcoin. And being virtual implies that it exists online only.

Banning this and other virtual currencies could kill future innovations. However, some experts argue that their continued adoption and use will interfere with the current financial system’s stability. Some people believe that Bitcoin and other digital currencies will trigger the next financial crisis. That’s because some people could ditch fiat currencies in favor of Bitcoin. And this will destabilize the current global financial system. Here’s why some people believe that Bitcoin needs regulation.

Regulation Will Protect Investors

Like most financial assets, Bitcoin’s value is prone to price volatility and market manipulation. Crypto asset prices have experienced wide fluctuations over the last years. For instance, Bitcoin’s price dropped to $47K before increasing to $57K within months. Miss-selling can also happen in the crypto world due to low investor awareness. For this reason, Bitcoin needs regulations to disclose the underlying assets, their adoption, performance, risks, and potential.

Regulation Will Prevent Illegal Use of Bitcoin  

Bitcoin is easy to use illegally without regulatory oversight. Unfortunately, Satoshi Nakamoto’s mission of ensuring that a central governing body doesn’t control money is tempting for criminals. It’s no secret that criminals have used Bitcoin for dark web purchases for many years. Bitcoin’s regulation can correct such errors and enable it to fulfill its potential. For instance, rules can ensure that people use their real identities when buying and selling this cryptocurrency on platforms like That way, governments can prevent repeating what happened to the Bittrex where people used false names.

Cyber Security Issues

Cyber security issues and online fraud put the Bitcoin investments that people store virtually at risk. Hacking is among the primary threats for financial institutions like banks, and even the Federal Reserve has experienced numerous cyber attacks over the last decade. Cyber attacks can lead to significant losses for an investor with savings in cryptocurrencies.

By regulating Bitcoin, governments can implement measures that will require cryptocurrency holders to protect their clients’ assets. What’s more, investors will have a way to address concerns or reclaim their investments if service providers holding them on their behalf lose them.

Technological Risks

Technological changes can render the blockchain obsolete down the road. And this is a significant risk to crypto investors. Considering the changes’ pace and disruption, digital assets’ value or purchasing cryptocurrencies as a long-term investment requires them to remain relevant for a long time.

By regulating the crypto industry, governments can require investment companies to provide information, infrastructure, and even financial advisors with experience in crypto assets. That way, people can understand the technological risks of Bitcoin and make more informed investment decisions.

Bitcoin Classification

Is Bitcoin a digital token or a tradable asset? Some people don’t know whether Bitcoin is an asset or an asset they can trade on a digital platform. Since Bitcoin doesn’t have any central government’s backing, it’s not legal tender.

By regulating Bitcoin, governments can clear its classification as a digital token or a tradable asset. That way, people can know what they are purchasing or trading when dealing with Bitcoin.

Final Thoughts

It’s easy to see why the government should regulate Bitcoin. With comprehensive regulations, governments can create a safer ecosystem for players in the crypto industry.

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