Under the new regulation, digital assets such as Bitcoin and other crypto assets will be classified as securities that the Securities and Exchange Commission regulates.
Many people were taken aback by this announcement, given how the SEC’s Jay Clayton had previously claimed that Bitcoin is not a security: “Historically, cryptocurrencies were used in place of sovereign currencies…they replaced the yen, the dollar, and the euro with bitcoin. A currency of that type is not security.”
Crypto assets, particularly Bitcoin, have gained immense popularity in these recent years. Bitcoin serves both as a form of storing value and a medium for facilitating transactions. There is no need for a middleman or regulatory body to approve near-instantaneous transfers worldwide.
Many Nigerian cryptocurrency enthusiasts are concerned that such regulation will destroy the industry, but they should not. Bitcoin is extremely unlikely to be controlled in any way.
Aside from the challenges posed by Bitcoin’s decentralisation, there is also the issue of governments and regulatory bodies’ ignorance of technological topics.
There have been attempts at regulation over the years, and now that Bitcoin’s value has reached record heights, governments are more eager than ever to take action.
- Bitcoin has several key components that make it practical as a means of exchange and a store of value. They are simple to transfer, do not require a middleman, and can’t be traced to owners who do not wish to have their identities revealed.
- Bitcoin is not associated with any financial institution or territory. Even if no crypto exchanges existed, all you needed to conduct bitcoin transactions was a wallet and an internet connection.
- As a public ledger, the blockchain on which the system is built doesn’t require any institution to operate it. Any meaningful crackdown would have to be conducted globally without that central location to shut down.
- A VPN or proxy system would allow users to work worldwide even if a government were to prohibit bitcoin transactions within its borders.
- Pirate websites would have been shut down over a decade ago if governments could effectively shut down peer-to-peer networks in an ideal world.
- It is difficult to track down individual wallet owners. Even if governments or law enforcement are able to track down specific bitcoins using the public blockchain, it is extremely difficult to link them to a real-world person. Wallet owners can conceal their identities using VPNs, Tor, or by physically storing their wallets in cold storage (offline), rendering them inaccessible to the outside world.
If the Nigerian government and regulatory bodies want to manage the space more effectively, they should consider collaborating with top stakeholders, users, and developers.
