In what is fast becoming a fight between the establishment and the anti-establishment movement this week we saw Singapore and India looking to clamp down on cryptocurrencies such as Bitcoins. The price has been volatile to say the least although there is a chance that the introduction of the new regulations to weaken cryptocurrencies could further strengthen the anti-establishment cause. Those against cryptocurrencies are well aware that they have no real say over the currencies themselves but they can restrict their trading, their use and ultimately their attractions to investors.
Are new regulations restricting trade?
The strange thing is that regulators across the likes of Singapore, India and many other countries around the world are effectively looking to ban cryptocurrencies in order to “protect investors”. The simple fact is that investors can and will make their own mistakes, can do their own research and while regulations are helpful, restrictions are not. There obviously needs to be a more structured approach to cryptocurrencies in general although the specific focus on the likes of Bitcoin would indicate that some regulators and some central banks are actually running scared.
Businesses fighting back
Businesses and the general public are perhaps showing their displeasure at the growing erosion of democracy around the world. We only need to look at the European Union which seems to supersede all democratic views of member states to introduce ever closer ties. It is fair to say that the business arena has not really taken cryptocurrencies to their heart but there are some companies who will accept Bitcoins and other similar payment methods. There is the potential for businesses to increase usage of cryptocurrencies the more that the establishment looks to bury them.
In reality, unless a business is able to convert Bitcoin payments as soon as they are received they will be at the beck and call of what are currently extremely volatile markets. Would any business really want to take a currency which could move anything up to 50% in an instant on the currency exchanges?
Relatively stable currencies overlooked
While the focus at the moment is certainly on Bitcoins it is worth noting that there are cryptocurrencies out there which are backed by assets. It seems fairly obvious that governments around the world are using the unbacked nature of the Bitcoin currency as a stick with which to beat the whole sector. In many ways the “cat is now out of the bag” with regards to cryptocurrencies and whether governments around the world like it or not they are here to stay.
At some point we will no doubt see the introduction of a self-regulatory system potentially outside of the control of governments. The idea that cryptocurrencies will attract the criminal fraternity is flawed in many ways because there are ways and means of moving money within so-called legitimate markets.
Protecting the speculators
One of the main problems with regards to cryptocurrencies is the fact that relatively inexperienced investors are now being drawn into this “riches overnight” scenario. When investors start pumping money into assets in which they have limited experience and even less knowledge that is the time to worry. There is talk of a potential knock-on effect to the worldwide financial markets in the event of a cryptocurrency collapsing and the more popular these currencies become the greater their potential impact. Governments need to accept cryptocurrencies are here to stay and the cryptocurrency operators need to accept at least a certain level of regulation.