Blockchain and Tulip Bulbs: The Disquieting Silence of Regulators

Blockchain and Tulip Bulbs: The Disquieting Silence of Regulators

Blockchain is on a mainstream tear. Over the Thanksgiving weekend alone, Coinbase — the United States’ largest exchange for trading blockchain’s blue-chip crypto currencies, bitcoin and ethereum — added over 100,000 discrete accounts in a little over 24 hours. Not surprisingly, both bitcoin and ethereum zipped to all-time-high valuations and continue to dominate market discussions in traditionally buttoned-up magazines and outlets.

All this frothiness has investors, academics, and speculators alike wringing their hands with anxiety. Just yesterday, Stephen Roach of Yale’s School of Management warned that bitcoin is a “toxic concept for investors” and that its rise represents a “dangerous speculative bubble.” Jack Bogle — venerated founder of Vanguard and proponent of prudent, low-cost investing — told investors to “[a]void bitcoin like the plague” since it “has no underlying rate of return” and no support save “the hope that you will sell it to someone for more than you paid for it.”

 

Bitcoin, and blockchain generally, is no stranger to claims of fraud and wild speculation (Jamie Dimon has famously attacked bitcoin for years, recently calling it “worse than tulip bulbs.”).

But outsiders are not the only ones fretting that blockchain is dipping its toes into a tulip-tinged mania (fun fact: tulip mania itself is a myth). Longtime blockchain supporters and thought leaders have openly questioned whether the space can justify or bear the money flooding into it. The question then, if outsiders and insiders alike are worried, is why?

One reason: Uncertainty.

As late as 2017, jurisdictions have been loath to weigh in on blockchain, preferring to allow existing laws and regulations to govern the space. That hands-off approach appears to be ending, however.

China and Korea have recently cracked down on initial coin offerings (ICOs). RussiaSingaporeBritain, and others have weighed in on the phenomenon as well.

More locally, the SEC has intimated that at least some cryptocurrencies could fall within its regulatory purview — but at the same time has exhibited notable restraint, declining to take action against all but the worst ICO-related scams.

Likewise, while the IRS has not formally weighed in on taxation of cryptocurrencies since publication of its March 2014 memorandum, it recently won a minor battle with Coinbase to compel that exchange to disgorge financial records of some of its account holders who, the IRS suspects, have been evading tax payments.

So what are investors to make of this regulatory mish-mash? It’s hard to say — some argue that regulation could tamp down the innovation and adoption of blockchain, while others think that more regulation is necessary before main street investors will entertain blockchain as an asset.

Whatever the outcome of the current regulatory fog, however, one thing is certain: blockchain investors, enthusiasts, and side-liners should all push to reconcile the technology and its implementation with existing laws and — like Delaware’s recent blockchain legislation effort — advocate for regulations that both support the blockchain effort and protect its users and developers.

In so doing, blockchain can take another necessary step toward adoption. Check out stockchainglobal.com as a further reference of these regulations. 

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  • Morgan Selenius

    I never quite understood cryptocurrencies' juridiction & regulation but finally I do!

  • Mohsen Khan

    I would say that Bitcoin is in the early 90's stage of adoption that the internet was in.

  • Rob K

    Block chain is too confusing but thankfully your post explained to some extent.

  • Shawn Mendes

    Bitcoin is creepy.....

  • Roman

    Who else is honest enough to admit that Bitcoin, XRP, Litecoin and Etherium are actually more diverse and complex than initially thought?

  • Chris Mando

    I'm impressed with how well you broke down a fairly complex subject.

  • Chris Mando

    Thank you for making an accurate article on blockchain and tulip bulbs. There's so much misinformation about this topic out there.

  • Nathan Richter

    I love how you explain stuff. I have never found a way to explain people how regulation works in cryptocurrencies in an easy non technical way. you nailed it!

  • Logan Andren

    Between the government and hackers, I prefer hackers.

  • Gustavo Ramos

    One of the best crypto new channels. Thanks for always being relative and informative

  • J Wolf

    I figured this would happen as it was getting more popular.

  • Tony F

    As citizens, it's our responsibility to make sure what we invest and meet the criteria of a sound investment, not the governments nor regulators. We don't need, and should not accept, their intervention.

  • Kumar Mehta

    Can you talk a bit about taxes? I know it is boring, but there is very little information and guidance about how to report and what to report with regard to crypto profits. No one wants an audit, haha :D

  • Dylan Lewis-Creser

    We already have a regulated stock market and I don’t see any benefit.

  • Jack Crawford

    good post, enjoyed reading it but I could not care less about what the SEC thinks about cryptocurrencies.....It's the bully that steals lunch money at school........

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Joe Martin

Tech Guru

Joe is the Head of Social Analytics and Brand Evangelist at Adobe. He is also the CMO of Stockchain Global and Advisory Board Member at Ylixr. He has over 10 years experience managing various areas of marketing including research, media buying, social, and overall strategy. His analyses have been featured in the New York Times, Wall Street Journal, CNBC, Associated Press, and Forbes. Joe holds a BSc in Finance and MBA in Strategy & Marketing from the University of Utah. He also has an Executive Degree in Entrepreneurship and Innovation from the Stanford University Graduate School of Business.

   

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