All Financial Wisdom

The Central Banks are not Regulating Bitcoin and We Explain Why

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The crypto-economy sector is a sector of the future. The crypto-economy sector has come to stay. The crypto-economy sector is transforming everything. But in reality it has not been a voluntary adoption of the most traditional economic sectors, but rather, the crypto-economy was skillfully inoculated by surprise by the enigmatic Satoshi Nakamoto. The visionary Nakamoto not only designed the first crypto-currency, Bitcoin, but also brought disruptive and futuristic protocols such as Blockchain that are literally eating many sectors.

But there is one thing that in the crypto-economy sector is conspicuous by its absence. We are talking about the non-existent regulation of the crypto-sector. The Central Banks do not dare to move file, but that should not surprise us in the slightest, and today we analyze why.

The regulation shines by its absence

As we said before, in particular Blockchain, or the distributed accounting protocol, is literally eating many economic sectors (and even social ones). In pursuit of security and truth in the era of fakenews and uncertain information of origin often unknown, distributed accounting is a visionary concept that takes advantage of decentralized networks, to ensure the most insecure and key collaborative internet and collective: the veracity of the information.

Besides the success of Blockchain, there is the fever of the crypt-gold that comes at the hand of the Bitcoin bubble and other crypto-coins. Regardless of the fact that the most habitual of these lines know that we have been alerting them for some time about the existence of this bubble, we also strongly believe that this concept of crypto-economy has also come to stay, although its adoption in this case really still has much more than showing that of Blockchain.

And in any cases, ultimately, Blockchain is a spectrum protocol of much wider applicability, and therefore with a more secure future than any crypto-currency. The concept of crypto-currency may be future-proof, but what we do not know is which particular crypto-currency that future will come from: in CoinMarketCap there are more than 800 listed.

The regulators and the Central Banks follow (very) closely the evolution of this revolution at all levels that supposes the crypto-economy in general. But some could say that they are committing a flagrant omission of their duty, because to date, no profuse regulation of the crypto-economy has been seen, except for some generic and not very binding statements, and even severe prohibitions as in the case of China or others. It is not the case of an omission of duty really.

The regulation will be necessary at some time point (in fact it already is)

The consensus of the sector is that, obviously, the crypto-economy is already an economic reality, it is rapidly penetrating almost all economic sectors, it poses new challenges to face with adetermination and futuristic vision … But as these institutions know better than nobody, the crypto-economy also brings important risks that, although most of which are still latent because the sector is still in diapers, at some point in the not too distant future, will have to regulate. But really there are already very tangible risks today, such as the explosive bubble of crypt-gold some say is currently underway.

The fact is that the aggressiveness of the crypto-bubble is leading to excesses, which may lead to the spreading of this madness to the real economy on Main Street. If it is clear then that at some point it will be necessary to regulate, then the question that inevitably comes to mind about it is: Why haven’t the regulators and central banks done something already?

The reasons why regulation Hasnt Arrived Yet

Contrary to what I usually do in these lines, on this occasion today I am going to give you the answer first, and then the reasoning. The regulators and the Central Banks are not regulating the crypto-economy because they can not do it yet. Why not?

First of all, we must bear in mind that these institutions are true professionals of regulation, and that nobody better than them knows what and when to regulate. The fact is that on this occasion they know perfectly well that it is too early to do so, but from these lines we would like to clarify that it may be soon in some aspects, although the difficulty of the equation is that, at the same time, it is already late in other aspects, like the explosive bubble. It is therefore a complex equation. The Central Banks, as professionals of regulation, know it perfectly.

The big problem is the dizzying speed of adoption that exponential progress is bringing to our socioeconomic systems that is putting these institutions in the great dilemma they have faced throughout its history: regulate at the optimum time for regulation to be effective and also avoid crisis and excesses.

But that exponential curve makes the dilemma more complex than ever before. The development of the crypto-economy is so fast in comparison to other socio-economic revolutions, that the learning curve that these entities use to be able to regulate correctly once they know what they are regulating, is a curve that is dwarfed by the one of exponential adoption.

The great dilemma today with the crypto-economy is how to regulate what is still not known at 100% (nor at 50% being conservative), not technologically, but because of the risks that it will bring to the socioeconomy, which is ultimately what it is about in the case of regulations. Guessing the future exceeds the possibilities of any analyst, but it is that regulating the future exceeds the possibilities of the Central Banks. And the problem is that never before in the History of Economics has the future been so present.

Stay tuned tomorrow for part 2 as we explore the possible outcomes of regulation…


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