- Regulation will boost crypto by weeding out “unholy” criminal activity, a law professor has said.
- Emilios Avgouleas said tougher rules may be bad for crypto prices in the short run, however.
- China is among the states cracking down on bitcoin, while the US’s SEC is taking a close interest.
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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.
Read more: Millennials are adding crypto to their retirement funds, but they could lose it all if the market sours. Two experts break down how to get the returns, but without the risks from digital assets
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.”