Regulators around the world have been cracking down on cryptocurrency trading, and exchange operators have been retrenching.
Binance said on Monday that users in Singapore won’t be able to trade on its main platform. Chinese crypto exchange Huobi will stop taking new mainland customers. And U.S. Securities and Exchange Chair Gary Gensler said at a conference this week that “people will be hurt” if crypto markets remain unregulated. But crypto insiders say that by its very nature, decentralized finance and crypto will find ways to survive and thrive.
“I don’t think there is an existential threat to crypto markets” from regulation, said Kristin Smith, executive director of the Blockchain Association, at Yahoo Finance’s All Markets Summit Plus: Crypto Investing. “Decentralization is incredibly powerful and these networks can exist in many different places. China has attempted to crack down on crypto multiple times now. They may be getting more aggressive on that front, but as long as the internet persists, crypto networks will persist as well.”
Concerns over regulation have hit crypto prices as of late. Bitcoin, for example, has fallen to below $42,000 from a high in early September of over $50,000. Volatility isn’t unusual in crypto markets, and investors are still expressing confidence, with inflows into crypto products and funds continuing for a sixth straight week, according to CoinShares. Even in China, some buyers remained undeterred by recent governmental rhetoric.
Nic Carter, co-founder at CoinMetrics and general partner at Castle Island Ventures, has faith that free markets will prevail.
“When markets and the state clash, generally speaking the market will win eventually,” he said at Yahoo Finance’s All Markets Summit Plus. “There are countless examples throughout history of countries trying to ban currency conversion, and they always failed ... It just so happens, cryptocurrency behind virtual, being something that is peer-to-peer by its very nature, something you can take full ownership of on a smartphone, is uniquely resistant to state control.”
Carter and Smith acknowledge that more regulation in the U.S. is probably inevitable, even necessary in some cases. Smith, whose role is to engage with policymakers on behalf of crypto and blockchain companies, said it’s not as though the space is entirely unregulated now.
“To say this space is the Wild West is simply not true,” she said. “I want to remind people, a lot of entities acting as intermediaries in the crypto space are registered. They have state money transmitter licenses.”
Smith said there’s a disconnect between the SEC and the industry on how securities law is applied to crypto. This was thrown into the spotlight by a series of tweets from Coinbase CEO Brian Armstrong, who derided what he called “sketchy behavior” by the SEC. Ultimately, Coinbase said it would propose a regulatory framework and try to work with policymakers.
“We have a lot of work to do” when it comes to regulation, Smith said.