Expert Opinion: Will Bitcoin Regulation Doom The Market?
How The Coming Bitcoin Regulation Could Wipe Out Your Digital Wallet
After Bitcoin steadily increased and peaked at $19,000 in December 2017, the cryptocurrency started to crash. In February 2018, Bitcoin sharply declined by 50%, and other cryptocurrencies followed suit.
This high volatility in cryptocurrencies has long puzzled economists due to the fact that there are no regulatory bodies governing their price movements. That said, however, some experts theorize that government regulation may be one of the key factors that is affecting Bitcoin’s value.
Last month, Bill Winters CEO of Standard Chartered, warned that government regulation is one of the leading factors that continue to influence Bitcoin price. He boldly claimed that the cryptocurrency’s prices will plummet as soon as more governments meddle with the current state of digital funds.
“The cryptocurrencies themselves I imagine will find themselves quite regulated,” said Winters. “But like (what) is happening in Korea and China, I find it hard to imagine that authorities are going to allow widespread use of any currency or cryptocurrency for cross-border payments or domestic payments for that matter without some ability to be able to look in and see what is going on.”
Winters’ sentiments coincide with The Verge’s report on the decline of cryptocurrencies. The news site asserts that the international movement toward harsher regulation has been noted as a major cause of decline for cryptocurrencies.
Morgan Stanley also believes that regulation plays a role in the price movements of cryptocurrencies. However, instead of focusing on the negative effects of Bitcoin’s regulation, the investment firm believes that government acknowledgment of the cryptocurrency could attract trust from the public. Morgan Stanley believes that government acceptance is required for the future acceleration of Bitcoin’s prices.
Other financial organizations, however, do not believe that it’s anyone’s responsibility to regulate Bitcoin. Coinwire reports that European Central Bank Chief Mario Draghi declared that the central bank’s function does not include regulating Bitcoin’s currencies. Draghi respects the decentralized nature of digital currencies, and doesn’t seem to be fazed by their worldwide popularity.
This isn’t the first time that the ECB Chief voiced this type of response. In September 2017, Draghi said that central banks have no authority over cryptocurrencies. On November 2017, he also asserted that digital currencies need no regulation because it has very little impact on the global markets.
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Despite the fact that governments can regulate Bitcoin, however, Draghi may be correct in saying that intervention by authorities may be limited.
In a post by Project Syndicate titled Crypto-Fool’s Gold?, economist Kenneth Rogoff says that Bitcoin will never replace regulated money because that would make it extremely difficult to collect taxes or thwart criminal activity. However, he also believes that the cryptocurrency will be here to stay.
“Would the price of Bitcoin drop to zero if governments could perfectly observe transactions? Perhaps not,” said Rogoff. “Even though Bitcoin transactions require an exorbitant amount of electricity, with some improvements, Bitcoin might still beat the 2% fees the big banks charge on credit and debit cards.”