The Future of Cryptocurrencies

By Ryan Chen

On January 27, the Biden administration announced that it would plan to issue an executive action that will allow federal agencies to regulate cryptocurrencies such as Bitcoin. This, in my opinion,  is just one in an upcoming slew of regulations imposed by governments around the world on crypto. Why exactly do governments want to regulate cryptocurrency and what does this mean for worldwide exchange markets?

The future of cryptocurrencies, to me, does not seem to shine as glittery as it once did. Since the advent of this technology, regulation was inevitable. Why now then, one might ask? The answer here is obvious: public trust in government currency has never been lower in modern times. Just in the USA, the money supply has increased by three trillion, with inflation (CPI) at a record level of 7%. Nearly all markets are propped up in a bubble, waiting to collapse. Prices of essential goods, such as meat, have risen by up to 30%. The solution to this? Bitcoin. Today, Bitcoin acts like a commodity that is a hedge against inflation. Due to the scarcity, it has a value that in many cases is proportional to the money supply and inflation. 

In my opinion, governments are not nearly as afraid of the “criminal behavior” or “money laundering” that comes with these currencies. What they fear is the concept of cryptocurrency itself. They dread the idea of having no control over the financial transactions that their citizens partake in. Politicians like Biden and Xi tremble at the fact that the success of blockchain is very much a public referendum against their rules. 

Based on current trends, the future of cryptocurrency has two possibilities. First is outright outlawing – a complete ban that would prohibit any financial transactions through cryptocurrencies. This system has largely been successfully carried out in authoritarian countries like China. The second, and perhaps the more likely scenario, is the inevitable regulation of blockchain and NFTs – similar to those imposed on stocks and securities. My hope is that the latter is realized. In this scenario, though cryptocurrencies will be regulated, I think they will become a central part of the financial system. They will morph more into the function of existing regulated currencies like XRP, used to facilitate complex, fast, and secure financial transactions between citizens and banks. 

So, my verdict on cryptocurrencies is that if you fundamentally distrust the government and are looking to hedge that concern, cryptocurrencies are not the way to go. Instead, invest in traditional commodities that are going to be less regulated than cryptos – such as gold, silver, or oil – lifebuoys in the middle of the raging economic seastorm. But, if you truly believe that this technology will be the future of financial transactions, artistic expression, and the “metaverse”, then I strongly encourage you to maintain your position or even further invest in this future.