Cryptocurrency Regulations Wanted: Iterative, Flexible, and Pro-Competitive Preferred

Abstract

Since the creation of Bitcoin in 2009, the market for virtual currency has exploded with thousands of cryptocurrencies and trillions of dollars invested in cryptocurrency startups. Because of cryptocurrency’s popularity and potential to disrupt existing financial systems, the U.S. government understandably wants to regulate it. Overlapping federal and state regulatory approaches, however, created a mess of confusing and hard-to-follow rules for cryptocurrency entrepreneurs. If executed correctly, regulation can have a pro-competitive and beneficial effect on fledgling industries. Regulation D in the venture capital industry and the Digital Millennium Copyright Act safe harbors for Internet Service Providers offer two models of well-executed regulatory schemes. This Note argues that federal regulators must work together to create a straightforward and flexible regulatory scheme reminiscent of Regulation D and the safe harbors. Otherwise, the United States will continue to lose valuable innovation and economic benefits to countries with more streamlined cryptocurrency frameworks.