Cryptocurrency regulation is upside down

The approach taken by regulators fails to acknowledge the unique qualities of cryptocurrencies and the benefits they can provide, and instead seeks to impose traditional financial rules on a technology that cannot simply be forced into the same category.

New waves of cryptocurrency regulation are usually brought about following some form of incident within the cryptocurrency market. Regulators are therefore reactive to the various irregular events that happen in crypto and use these as a starting point for regulation. This is a shortsighted approach that shows lack of understanding of the technology at best. But to make matters worse, the reaction itself is usually the wrong one too.

Stablecoin Regulation

For instance, this is what the International Monetary Fund has to say about global regulation of stablecoins:

Global regulation for stablecoins should be comprehensive, consistent, risk-based, flexible, and focus on their structural features and use. Requirements on stablecoins should cover the entire ecosystem and all its key functions, and there should be additional oversight for systemic stablecoin arrangements.

This is fair enough but it’s also very vague, meaning that each country gets to decide how to regulate stablecoins. The way the UK government has…