Vitalik Buterin Advocates for Clearer Crypto Regulations, Cites Anarcho-Tyranny Concerns

Ethereum’s co-founder, Vitalik Buterin, recently voiced his concerns over the current state of cryptocurrency regulation, suggesting that we'd be better off with either complete anarchy or outright tyranny rather than the confusing mix we currently have.

Speaking on Warpcast, a social media platform built on the Farcaster protocol, Buterin highlighted a significant issue with how cryptocurrency regulation is shaping up, particularly in the United States. He described a scenario where the existing regulatory efforts trap honest cryptocurrency developers: “The main challenge with crypto regulation (especially in the US) has always been this phenomenon where if you do something useless, or something where you’re asking people to give you money in exchange for vague references to potential returns at best, you are free and clear, but if you try to give your customers a clear story of where returns come from, and promises about what rights they have, then you’re screwed because you’re ‘a security.’” According to Buterin, this “anarcho-tyranny” creates worse outcomes for the industry than either total anarchy or complete tyranny.

On the anarchy side, there is an overwhelming presence of bad actors, scammers, and baseless promoters proliferating on social media and other platforms.

Previously, Buterin had suggested three recommendations to address the proliferation of “useless” cryptocurrency products and services: limiting leverage, requiring audits and transparency, and implementing knowledge tests for users. While the feasibility of these knowledge tests at a regulatory level is uncertain, policies to limit project leverage and mandate auditing and transparency could be more straightforward to implement. However, the U.S. cryptocurrency community feels the regulatory approach is currently nebulous and uneven, despite the country having a significant number of cryptocurrency users.

Buterin advocates for a shift in the regulatory focus: “I would much rather see us move to the opposite situation, where issuing a token without giving a clear long-term story for why it will maintain or increase in economic value is the riskier thing.” He emphasizes that achieving effective regulation will require sincere cooperation between regulators and the industry.