Vitalik Buterin calls the US approach to regulating cryptocurrencies “anarchotyranny”

Ethereum co-founder Vitalik Buterin has once again expressed his concerns about the state of cryptocurrency regulation, particularly in the U.S. In a response to a user on Warpcast, a decentralized social media platform, Buterin pointed out a regulatory paradox that he believes is stifling the industry’s growth and integrity.

Buterin noted that the current regulatory framework tends to allow projects with unclear promises and ambiguous potential returns to operate with relative freedom. And counterproductively, projects that offer transparent earnings information and clearly define investor rights are often classified as “securities,” subjecting them to stringent regulations.

In the US, the Securities and Exchange Commission (SEC), under Chairman Gary Gensler, has initiated a series of lawsuits seeking to classify cryptocurrencies as securities. In its latest initiative, the SEC sued Consensys, alleging that MetaMask’s exchange and staking wallet services violate securities laws.

Many in the cryptocurrency industry have criticized the SEC’s “legislation through litigation” approach. In April, the Blockchain Association and Crypto Freedom Alliance of Texas accused the SEC of regulatory abuses in a lawsuit.

The SEC’s position on cryptocurrencies, which Buterin describes as “anarcho-tyranny,” creates a perverse incentive structure that he believes is more harmful to the cryptocurrency space than total regulatory anarchy or strict regulatory tyranny. He says the SEC’s approach encourages the creation of “useless” products and services.

He wrote:

“The incentive gradient that this ‘anarcho-tyranny’ creates ends up being worse for space than either regular anarchy or regular tyranny.”

He called for a change in regulatory approach, advocating a scenario where issuing tokens without a clear, long-term value proposition is considered riskier. In turn, projects that provide a transparent and credible long-term plan and follow best practices should be protected. It could be argued that Buterin’s suggestion makes logical sense and would create an environment that encourages innovation in authentic products with value.

According to Buterin, achieving this balance would require sincere cooperation between regulators and the cryptocurrency industry.

Buterin has consistently emphasized the importance of clear and fair regulation. He has often argued that the current regulatory landscape stifles innovation and encourages dishonesty. In previous statements, he has called for a regulatory environment that supports genuine projects while protecting investors from fraudulent schemes.

His latest comments reaffirm this position, calling on regulators and industry participants to engage in good faith dialogue. Buterin believes that by working together, they can develop a regulatory framework that will promote transparency, accountability and sustainability in the cryptocurrency industry.

Buterin’s advocacy for balanced regulation underscores the need for a nuanced approach that can support innovation while protecting investors. His insights continue to inform the ongoing debate on the future of cryptocurrency regulation.

Mentioned in this article