Tighter regulation of cryptocurrencies will benefit the industry in the long run by tackling “unholy” criminal activity and making digital tokens more legitimate, a finance law professor has said.
Yet, regulations may hit the value of cryptocurrencies such as bitcoin in the short term, Professor Emilios Avgouleas, chair of international banking law at the University of Edinburgh, told Insider.
“In the short run, regulation may be a bad thing, because market prices will go down,” Avgouleas said. “But at the same time regulation will weed out unholy activity and will make these alternative means of payment even more acceptable for the mainstream user.”
He said he believes that, “in the long run, it will make the shift away from government money, to digital means of payment, permanent.”
Avgouleas, who is also a senior research fellow at crypto technology company IOHK, also said that central banks’ plans to create their own digital currencies should legitimize cryptocurrencies in the eyes of consumers.
Regulators around the world are increasingly paying attention to cryptocurrencies, which boomed in the early months of 2021 before tumbling in May and June.
China has already begun a crackdown on bitcoin “mining” and payments. In the US, the new SEC chair Gary Gensler has spoken numerous times about how he feels there are gaps in the rules covering crypto.
Internationally, the world’s top banking regulator has said that financial institutions holding bitcoin or crypto should have to follow tough rules to make sure their exposure doesn’t cause financial instability.
Avgouleas said regulatory efforts should make cryptocurrencies more reputable and make it harder for criminals to use them. He said people want to know they’re transacting with something that’s “ethical and not used by the mafia.” Regulation will solve that, he added.
The recent regulatory crackdown in China has hit bitcoin hard, however, contributing to its tumble from $65,000 in April to half that in June. Chinese authorities have warned banks against facilitating bitcoin payments, presenting a potentially significant barrier to global adoption.
Some doubt that cryptocurrencies, which are often much slower than traditional digital payments, will ever be widely used for transactions. New York University professor Nouriel Roubini has said the Flintstones “had a better monetary system than bitcoin.”
Yet, Avgouleas said he’s bullish about the prospects of cryptocurrencies, believing they could become widely used around the world as they’re private, secure and international.
Avgouleas is unsure which cryptocurrencies may become the most popular in the future. But he said the billions of dollars that have been invested in the crypto world is likely to mean that “what is not fast and scalable today, would be super-fast and super-scalable tomorrow.”
Dogecoin continued to plunge on Tuesday as cryptocurrencies tumbled in the wake of a fresh crackdown by Chinese authorities.
The meme cryptocurrency lost 20% over 24 hours to hit $0.19431, according to CoinGecko. That was around 74% lower than its record high of more than $0.70, reached in May amid expectations that Elon Musk would use his “Saturday Night Live” performance to pump the token.
The dogecoin market was worth around $94 billion at its peak, but had dropped to roughly $25 billion on Tuesday, according to CoinGecko – a $69 billion loss.
Dogecoin suffered the heaviest losses of any major cryptocurrency on Tuesday. Yet others didn’t fare much better, with binance coin and cardano off by around 12%. Bitcoin and ether, the two biggest cryptocurrencies, dropped but less sharply.
Cryptocurrencies have fallen dramatically since May after Elon Musk halted payments for Tesla in bitcoin, citing its “insane” energy use, and China started cracking down on crypto “mining.”
Yet dogecoin has been hit particularly hard, with the token plummeting back to earth after skyrocketing in the spring.
Analysts have long warned that dogecoin is a case of speculative mania, with the price influenced more by celebrity-induced buzz than anything fundamental.
Musk was one of the main drivers of the rally in dogecoin. But he hasn’t said anything about doge in a while, and let fans down when he called it a hustle on SNL.
“Many expected Elon Musk’s SNL appearance to send the already-soaring dogecoin even higher,” Michael Kamerman, CEO of crypto firm Skilling, said. “It had the opposite effect.”
“Combined with China’s crackdown on cryptocurrency, the ripple effects are being felt by all digital currencies.” He added: “Whether or not it goes up or down from here is anyone’s guess.”
Nonetheless, dogecoin remained more than 7,000% higher for the last year on Tuesday, according to CoinGecko.
Billionaire investor Mark Cuban has defended bitcoin’s reputation as a digital rival to gold, as the price of the biggest cryptocurrency is hammered by a crypto crackdown in China.
Cuban said on Twitter on Monday that bitcoin is “better than gold.” He added: “No worries about storing it. Easy to transfer. Easy to trade. Easy to convert. Doesn’t require an intermediary. Can be fractionalized.”
The Dallas Mavericks owner and “Shark Tank” star said that he thought the biggest challenge to bitcoin was that there are “no William Devane-type commercials and all the people who believe gold is an inflation hedge.”
Cuban was referencing commercials by precious-metals asset-management firm Rosland Capital, which featured the actor William Devane saying gold is “the only currency I trust.”
The comments from Cuban came as bitcoin tumbled more than 10% against the US dollar to a two-week low. It dropped after Chinese authorities renewed a crackdown on cryptocurrency “mining” – the energy-intensive computing process by which networks are secured and new coins are created. At the same time, China said it had met with major banks to reiterate its ban on crypto services,
Bitcoin traded at around $32,300 on Tuesday morning, down from above $40,000 a week earlier and around 50% lower than its April record high.
Cuban holds bitcoin, and so has an interest in talking up its merits. Yet he also appears to firmly believe it’s a superior alternative to gold, having argued that the digital currency’s scarcity means it can hold its value as inflation rises.
His view is controversial among investors, however, and it has been challenged by real-world events. Bitcoin’s plunge from a record level of $65,000 in April has coincided with US inflation shooting up to a 13-year high.
The government in China’s Inner Mongolia Autonomous Region is cracking down further on cryptocurrency-mining operations.
The Inner Mongolia Autonomous Region Development and Reform Commission announced on Tuesday that it has set up a hotline, email, and mail address for the general public to report any outlying crypto-mining operations that are still active in the region.
The commission is also targeting mining companies that are posing as data centers and enjoying preferential policies in tax, land, and electricity prices, and any company that offers land rental services for crypto mining operations.
The creation of a hotline comes after the commission announced in March it was trying to fully clear out and shut down all virtual currency mining projects by the end of April 2021, per The Block.
According to Cointelegraph, Inner Mongolia was once a hub for cryptocurrency mining operations, and accounted for 7.71% of the global Bitcoin hash rate from September 2019 to April 2020.
Now, China has pledged to reduce carbon emissions, and Chinese authorities have cracked down on mining operations. China pledged in 2020 to reach carbon neutrality before 2060 and reach peak carbon emissions before 2030.
The announcement from Inner Mongolia comes as the cryptocurrency market experiences a steep sell-off. As of Wednesday afternoon, the global crypto market cap is $1.6 trillion, a 18.46% decrease over the last day, according to CoinMarketCap.