What market rules are needed when the dark jungle-like crypto field moves toward the mainstream?
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What market rules are needed when the dark jungle-like crypto field moves toward the mainstream?
The field of cryptocurrency is not just finance: it is also a network infrastructure platform.
Navigating Web3 tides with focused insightsAuthor: Scott Duke Kominers, a16z
Translation: AididiaoJP, Foresight News
As the U.S. government begins to recognize blockchain technology, the question now becomes how to better utilize it. Some may advocate for unregulated laissez-faire, but that would be a mistake. History and economic theory show that thriving markets require clear, consistent rules—and the crypto space is no exception.
In some ways, resistance to centralized authority is an innate characteristic of crypto. Bitcoin’s anonymous creator, Satoshi Nakamoto, designed the protocol to bypass financial intermediaries, envisioning a currency free from government or institutional control. Many early adopters shared a spirit of radical individualism reminiscent of the freewheeling "Cypherpunk movement," the open-source software movement, and early cryptography advocates.
But crypto's potential can only be realized when it is widely accepted and integrated into mainstream commerce. And for entrepreneurs and consumers to embrace crypto, they must have confidence in clear rules that prevent fraud while ensuring fair access. Without such confidence, people will hesitate to enter the market—let alone use crypto for everyday transactions.
Contrary to what some believe, a "free market" is not unregulated laissez-faire; it is a structured system where individuals can engage in voluntary exchange with reasonable expectations of fairness and security. Without basic protections, markets collapse. Without safeguards, uncertainty deters large-scale investors and legitimate businesses, leaving only speculation and bad actors.
We need crypto to become a general-purpose computer, not a casino.
What kind of rules does crypto need?
Economists from Smith to Hayek, Friedman, and De Soto have long recognized the crucial role governments play in establishing market institutions that allow markets to flourish.
Smith argued that property rights enable individuals to “secure the fruits of their labor,” and the government’s role is “tolerable administration of justice” to protect these rights. For Hayek, the government’s role was maintaining the rule of law while avoiding arbitrariness. Friedman acknowledged the government’s role includes enforcing contracts and protecting citizens from crimes against themselves or their property. De Soto pointed out that the lack of clear rules and property rights leads to “dead capital.”
Paul Atkins, the new chair of the U.S. Securities and Exchange Commission (SEC), echoed these views in a recent speech, stating: “Regulators should provide the minimum effective level of regulation necessary to protect investors, while allowing entrepreneurs and businesses to thrive.”
The rules governing crypto—like those governing all markets—should aim to achieve four key objectives:
First, predictability and stability. A functioning market requires clear, enforceable rules. Entrepreneurs need to know how their businesses will be regulated. Investors need assurance that rules won’t change arbitrarily. Consumers need to trust that their transactions are secure.
Second, protection of property rights. Secure ownership is foundational to any market. Crypto excels at encoding ownership through blockchain technology, but legal frameworks must reinforce and complement these protections.
Third, transparency and clarity of information. Efficient markets rely on reliable information. Buyers need to understand what they are purchasing, whether digital assets, decentralized finance products, or NFTs. Regulations should promote disclosure to help consumers and investors make informed decisions, while preventing fraudulent schemes.
Finally, fair competition. Rules should prevent monopolistic behavior, market manipulation, and fraud. Without oversight and tailored guardrails, markets may become playgrounds for bad actors who exploit information asymmetries, deceive investors, or artificially inflate asset prices. Any regulatory framework must align with existing rules to avoid inadvertently creating new loopholes around established protections.
These four characteristics are essential to market function: stability and predictability encourage participation; clear property rights are a prerequisite for transactions to occur. Then, transparency and open competition help ensure that the transactions people choose advance markets toward more productive and socially valuable outcomes.
The path forward
Crypto is not yet an industry with sound regulatory institutions, but it is finally moving in that direction. For years, crypto startups have operated in a murky and often hostile regulatory environment. As a result, even though blockchain technology provides strong internal protections for property rights, the surrounding regulatory landscape has been far from supportive of healthy markets.
For example, until recently, the U.S. Securities and Exchange Commission (SEC) held crypto companies liable for alleged violations without first establishing clear legal standards. Entrepreneurs were left guessing which rules applied, only to face lawsuits afterward. This created uncertainty, stifled innovation, and allowed bad actors to operate in the resulting gray areas.
Moreover, many crypto regulations were built for traditional financial systems, treating blockchain-based assets merely as new forms of traditional securities or commodities. But crypto is not just finance—it is also a network infrastructure platform. Effective regulation must recognize both dimensions, ensuring financial oversight does not stifle technological development.
Crypto has the potential to transform the organizational logic of everything from personal identity verification to event management and global payments. But realizing this potential requires legal and regulatory guardrails—such as token taxonomy providing legal definitions for digital goods; standards for assessing decentralization and disintermediation; consumer protections; tax guidelines; and a framework enabling legitimate blockchain-based businesses to operate without fear of arbitrary prosecution.
None of this is radical or unprecedented. The principles that make markets work—stability, property rights, transparency, and fair competition—are well understood. But they have not yet been consistently applied to crypto. That must change—and the industry must welcome it.
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