Vitalik Buterin, co-founder of Ethereum, has once again raised concerns about the state of cryptocurrency regulation, especially in the US. Responding to a user of Warpcast, a decentralized social media platform, Buterin highlighted a regulatory paradox that he says is hindering the industry’s growth and integrity.
Buterin noted that the current regulatory framework tends to allow projects with vague promises and ambiguous potential returns to operate in relative freedom. And counterproductively, projects that provide transparent information about returns and clearly define investors’ rights are often categorized as “securities,” subjecting them to strict regulations.
In the US, the Securities and Exchange Commission (SEC), led by Chairman Gary Gensler, has filed a series of lawsuits seeking to classify cryptocurrencies as securities. In its latest effort, the SEC has taken Consensys to court, arguing that its MetaMask wallet’s exchange and staking services violate securities laws.
Many in the crypto industry have criticized the SEC’s “legislation through litigation” approach. In April, the Blockchain Association and the Crypto Freedom Alliance of Texas accused the SEC in a lawsuit of overstepping regulations.
The SEC’s stance on crypto, which Buterin describes as “anarcho-tyranny,” creates a perverse incentive structure that he argues is more damaging to the cryptocurrency space than complete regulatory anarchy or strict regulatory tyranny. According to him, the SEC’s approach encourages the creation of ‘useless’ products and services.
He wrote:
“The incentive gradient that creates this ‘anarcho-tyranny’ ends up worse for the space than ordinary anarchy or ordinary tyranny.”
He called for a shift in the regulatory approach, advocating a scenario where issuing a token without a clear long-term value proposition is considered riskier. In contrast, projects that deliver a transparent and credible long-term plan and adhere to best practices should be protected. One could argue that Buterin’s suggestion makes sense and would create an environment that fosters innovation of real value products.
According to Buterin, achieving this balance would require serious cooperation between regulators and the crypto industry.
Buterin has consistently emphasized the importance of clear and fair regulations. He has often argued that the current regulatory landscape hinders innovation and encourages unfairness. In previous statements, he has called for a regulatory environment that supports real projects while protecting investors from fraudulent schemes.
His latest comments reinforce this position and urge regulators and industry participants to engage in a good-faith dialogue. Buterin believes that by working together they can develop a regulatory framework that promotes transparency, accountability and sustainable growth in the cryptocurrency industry.
Buterin’s call for balanced regulation emphasizes the need for a nuanced approach that can promote innovation while ensuring investor protection. His insights remain a leading voice in the ongoing debate over the future of crypto regulation.