Trust in government has been declining for decades. In the United States, 73% of people polled said they trusted the national government in 1958, but by 2021 this had collapsed to just 24%.
And this is just for general public policy: tech heads may have even more reason to distrust their government due to the tendency for lawmakers to be pushing on the boomer years, or Gen X at best.
How could Joe Biden, at the ripe age of 79, possibly govern and steer the emergence of nascent technologies such as blockchain? It’s a very valid fear for those who hope crypto will turn the system on its head, especially considering that blockchain poses an existential threat to financial institutions.
They’re Not All Dinosaurs
One saving grace is the existence of great minds in financial regulatory bodies. Sure, governmental organizations probably don’t like the idea of cryptocurrencies not controlled by them. But digital currencies and assets raise an interesting question regarding how we register data and transact across borders.
We haven’t yet seen a heavy handed approach. The Federal Deposit Insurance Corporation (FDIC) only stepped in when it needed to rebuke the implication from five crypto-related entities that user funds were insured. Otherwise, lawmakers have been content to see how things develop.
The main concern of regulators will be how to protect the retail investor: many estimates for the investment game as a whole say the majority of this group lose money on the market.
So it’s sort of to be expected that most people will lose money on crypto, but more to the point: rug pulls, scams, sending funds to wrong addresses, pump and dump schemes by influencers. These will all be a major point of contention for lawmakers before they lend legitimacy to an industry dogged by scandal.
Regulation May Mirror Blockchain Success
Mainstream adoption is very much in the future, because blockchain is simply not where it needs to be technology-wise. The blockchain trilemma of achieving scalability, security and decentralization, despite the claims of some chains, is not proficiently solved for: this may be required in order to usher in an age of mass usage.
Expect regulators to intervene swiftly once blockchain becomes ubiquitous. It can be hoped this will make it harder for malicious actors to operate in the space as successfully as they have already. Furthermore, stringent security standards for exchanges and protocols may become a legal necessity for them to operate.
Crypto is still considered somewhat niche, despite reaching plus one trillion market cap in recent history, therefore lawmakers have not needed to act decisively. The current political system does not lend itself to moving rapidly in reaction to the digital age, but you can be sure people are working to rectify this issue.
Once the political machine is geared heavily towards blockchain regulation, a likely result of mass adoption, we can expect a playbook to emerge for crypto organizations to abide by. This may well be a good thing, although it entirely depends on the motives and understanding of the regulators themselves.