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Experts Caution Against Overregulating Cryptocurrency

Though regulators may want to regulate cryptocurrency to protect consumers, experts argued that overdoing it could impact innovation.

Benjamin Kahn

Feb 16, 2022 — 5 min read

Screenshot of Francis Suarez, mayor of the City of Miami, at the Wilson Center event

WASHINGTON, February 16, 2022 – Despite the unknowns of cryptocurrency, experts cautioned last week against overregulating it for fear of stifling innovation in the burgeoning sector.

During the Broadband Breakfast event on February 9, University of Arkansas Professor of Law Carol Goforth argued that one of the most significant issues facing cryptocurrencies is striking a balance between regulation and consumer safety.

“The growing challenge is finding a balance between the legitimate need to protect the public, investors, and our financial structures and systems against abuse, [with] the desire to protect and encourage legitimate entrepreneurs,” Goforth said.

One of the benefits that often piques the interest of consumers while also worrying regulators is the decentralized nature of cryptocurrency. Cryptocurrency advocates often tout the lack of a single regulatory body with domain over the blockchain and cryptocurrency as an enticing feature, while governments are often left scrambling for ways to still protect consumers in the often anonymous and deregulated sector.

Matthew Snider is the senior vice president of Centri Tech – an organization dedicated to improving broadband connections and utilizing those connections to improve user quality-of-life. “Decentralization is a spectrum,” Snider said. “There are lots of different places where people can land on that [spectrum].”

He explained that this spectrum has extremes on both sides – with one extreme relying on a central bank, all the way to a completely disaggregated blockchain that operates independent of any body.

Goforth said that if regulators, such as the Securities and Exchange Commission, had their way, entrepreneurs and companies may find themselves disincentivized to conduct their business in the United States if they were planning to leverage blockchain and cryptocurrency technologies.

“There is a huge pressure – not just to not do business [in the United States] – but to protect American investors by not letting them decide for themselves whether or not this is a risk they want to take.”

“To my mind, that is a very clear example of regulatory overreach that is likely to harm American investors and is likely to push technology and entrepreneurs away from our country in a way that is not optimal for anyone – other than folks who like large jurisdiction for the SEC.”

Uncertainty still exists

Snider said that while you have some countries that are leaning into the technology, many are still unsure of how to approach it.

“You have got some countries that have made [cryptocurrency] their national currency, and you have got countries like Russia and China that said ‘no, it is banned,’” Snider said. “I think you have people who do not understand something who are taking laws that are anachronistic in nature – very old – and saying ‘hey, these buckets apply because we cannot think of other buckets to put them into at the moment and we do not have the time or the effort, so we are just going to put them into these buckets and hope that they work.’”

Snider also added that for all the effort regulatory bodies and countries have put into trying to regulate cryptocurrency, all it takes to circumvent the laws is a virtual private network, or VPN, that enables users to send and receive data while obfuscating their location from those who might be trying to monitor them.

“There is a very big lack of being able to control [cryptocurrency], and it is freaking them out,” Snider said.

Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. You can also PARTICIPATE ONLINE in the current Broadband Breakfast Live Online event on Zoom.

Wednesday, February 9, 2022, 12 Noon ET — Harnessing Cryptocurrency

Join us in person for a Broadband Breakfast for Lunch on cryptocurrency. In Broadband Breakfast’s premiere session on the subject of decentralized finance, we’ll explore recent developments in the blockchain, consider the ways that cryptocurrencies are impacting global financial transactions and transfers, and address government officials’ attempts to harness – or to banish – blockchain-based digital coinage.

Panelists for this Broadband Breakfast Live Online session:

Jennifer Schulp, Director of Financial Regulation Studies at the Cato Institute’s Center for Monetary and Financial Alternatives
Carol Goforth, Clayton N. Little Professor of Law, University of Arkansas in Fayetteville
Matthew Snider, Senior Vice President, Centri-Tech
Drew Clark (moderator), Editor and Publisher, Broadband Breakfast

Panelist resources:

New Technology and Old Rules: Constructing a Crypto Regulatory Framework, Cato Institute series of four events, November 22, 2021-January 13, 2022
Regulation of Cryptotransactions, by Carol Goforth and Yuliya Guseva
Broadband Internet Solutions for Affordable Housing, Centri Tech
NFT Consulting
Will web3 reinvent the internet business?, The Economist, January 28, 2022
CES 2022: Cryptocurrency Leaders Press Benefits as Uncertain Over Regional Clampdowns Looms, by Benjamin Kahn for Broadband Breakfast
U.S. Needs to Modernize with Blockchain and Cryptocurrencies, Said Former Trading Commission Chairman, by Benjamin Kahn for Broadband Breakfast
NFTs May Be Central to the Emerging ‘Internet of Value,’ Say Experts at Pulver VON3, by Megan Boswell for Broadband Breakfast

Jennifer Schulp is the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives, where she focuses on the regulation of securities and capital markets. She has testified before the U.S. House Committee on Financial Services, and her writing has appeared in Business Insider, MarketWatch, and others. Before joining Cato, Schulp was a director in the Department of Enforcement at the Financial Industry Regulatory Authority Inc., representing FINRA in investigations and disciplinary proceedings relating to violations of the federal securities laws and self-regulatory organization rules.

Carol Goforth is the Clayton N. Little Professor of Law at the University of Arkansas in Fayetteville. She is the author of more than a dozen academic articles dealing with regulation of cryptoassets and transactions in them, as well as Regulation of Cryptotransactions, a comprehensive text for law students and others interested in crypto regulation published in 2020 by West Academic. The second edition of that book is expected April of this year.

Matthew Snider is Senior Vice President of Strategy and Business Development at Centri Tech. His career has been focused on bringing broadband affordability and adoption to underserved communities, both urban and rural. An active participant in the blockchain economy for the past six years, Snider understands the impact that these technologies play in building out use case solutions that bring more adoption to broadband, and to the blockchain.

Drew Clark is the Editor and Publisher of BroadbandBreakfast.com and a nationally-respected telecommunications attorney. Drew brings experts and practitioners together to advance the benefits provided by broadband. Under the American Recovery and Reinvestment Act of 2009, he served as head of a State Broadband Initiative, the Partnership for a Connected Illinois. He is also the President of the Rural Telecommunications Congress.

WATCH HERE, or on YouTube, Twitter and Facebook.