Why Regulation Should Apply to Bitcoin

Two weeks ago, Ukraine passed a new law on virtual assets. It is a fundamental law that establishes the principles of the regulation of the crypto market. The law does not contain specific requirements or direct obligations. Nevertheless, the existing opinions that cryptocurrencies do not need any regulation, even if it harms them, have agitated the Ukrainian crypto community.

It should be understood that the crypto-anarchist movement is quite strong in Ukraine. Historically, one of the first anarchist republics in the world was proclaimed in these lands a hundred years ago – the Free Territory. If you’ve never heard of it, I highly recommend reading about this period in history. It is an exciting experience. But these thoughts got me thinking how much regulation really hurts bitcoin.

The idea that bitcoin exists outside of legal regulation is also wrong. I’ll give another analogy here. We may treat air differently, but atmospheric pressure applies to all of us. The laws of physics apply to us, regardless of our opinions and beliefs. We are all the same object of attraction of the Earth, and we are in its atmosphere. In the same way, when we are in a particular society, we must follow its laws, no matter what we think of them. Now, if we have new relationships occurring or arising, they are not placed in a legal vacuum. Basic rules apply to them, but most likely – especially with laws and regulations written before any digital asset (or even the internet) existed – they fit in so badly that they only cause difficulty.

That’s why all this regulatory mess is happening. If you look closely, hardly any new laws are passed, but new decisions are made. This all works pretty badly when the foundation (the old law) is disconnected.

Let’s try to look at this situation from the technical side. If we consider any social relationship as a social construct, it turns out that laws are just a kind of protocol describing the establishment of social relationships. Bitcoin uses its protocol to implement transactions and establish links between different participants. But there will always be people behind these wallets, and the “Bitcoin White Paper” dominates Bitcoin’s code – not people. Therefore, we have two different protocols. It is a law protocol and Bitcoin protocol.

Bitcoin is allowed as long as it has not been banned. Passing a law does not necessarily mean bitcoin has become regulated or legalized. It is simply for this object to have its own unique rules of operation and, therefore, more comfortable. So when analyzing the views of the community, just as the community is working to improve the Bitcoin protocol, we must realize that we must also work to improve the law. The Bitcoin protocol was not perfect from day one and continues to improve – the laws surrounding Bitcoin work the same way.

This is a guest post by Artem Afian. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.