Singapore’s well-meaning attempt at crypto regulation may not work out, given its skeptical approach to the asset class, Ethereum co-founder Vitalik Buterin said in an interview with The Straits Times on Nov. 20.
Buterin said he appreciates the city-state’s willingness to be supportive, but it could all be for nothing.
“I definitely appreciate the amount of effort that they have been putting into it, and just their willingness to explore many different kinds of applications and be supportive,”
Regulators worldwide want to be supportive of emerging technologies but also find cryptocurrencies “weird and scary” simultaneously, he said. The lack of understanding and fear of crypto makes regulators try and treat blockchain as a separate technology from crypto.
This is the case in Singapore, where regulators attempt to distinguish between blockchain usage and cryptocurrency. India is trying to adopt a similar approach, while some Chinese regulators have already attempted deploying blockchains that don’t use cryptocurrencies.
However, Buterin said there’s a “tight connection” between blockchain and crypto, such that “you can’t really have one without the other.” He added:
“I think some of the regulators in China definitely sort of tried to have one without the other and the reality is, if you don’t have cryptocurrency, then the blockchains that you’re going to have are just fake and nobody’s going to care about them.”
However, Singapore regulators are just trying to “discourage cryptocurrency speculation” without banning crypto outright, Buterin said. Although Singapore had earlier positioned itself as a crypto-friendly jurisdiction, it has started tightening regulations over recent months.
Besides, Buterin acknowledged that it could be “tough” for countries and regulators to reach a healthy balance between supporting new technologies without becoming a hotspot for bad crypto actors. But, when it comes to balancing crypto regulation, “there’s good ways to do it, and there are bad ways to do it,” he said
After China’s crypto ban, many crypto firms fled to more friendly jurisdictions like Singapore. But, the “biggest risk of being friendly” is that the countries end up attracting people like Terra co-founder Do Kwon, who is being investigated for fraud in the aftermath of the Terra-LUNA collapse, Buterin said.
Do Kwon spent considerable time in Singapore, and many individuals connected with the Terra-LUNA collapse. Buterin added:
“It’s definitely true that if a country is not smart about it [crypto regulation], they can easily end up being stuck as the base for all of the Do Kwon people. And that’s not necessarily something that country would want.
But on the other hand, I think it’s definitely possible to engage productively and get a lot of benefits.”
What the crypto community can do to discourage bad actors
According to Buterin, the Bitcoin community “automatically loves everyone rich and powerful who supports Bitcoin,” which is folly. Reiterating his criticisms against El Salvador’s “top-down” Bitcoin adoption last year, Buteirn said that the Bitcoin community rejoiced at the news while ignoring the grave realities of the nation.
The community promoted El Salvador even though El Salvador President Nayib Bukele’s government is “not very democratic” and is not good at “respecting people’s freedom,” Buterin said. He added:
“That’s an example of the kind of mistake that a cryptocurrency community could do to enable bad behavior.”
According to Buterin, the Ethereum community has done better in terms of being selective about who it promotes and associates with. Besides, when it comes to preventing bad actors, the most that the community can do is “be active in supporting good things and opposing bad things,” he said.
Aside from this, regulators can put up guardrails, and the community can “educate users,” Buterin said. But “there’s a limit to how much bad activity you can prevent” because the nature of the blockchain system requires it to be open to all.
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