Ethereum Co-Founder Vitalik Buterin Decries State of Crypto Regulations as ‘Anarcho-Tyranny’

Ethereum co-founder Vitalik Buterin has voiced his frustration regarding the current state of cryptocurrency regulations and proposed a potential solution to address the issue.

Buterin’s remarks came in response to a user on Warpcast, a social media platform built on the Farcaster protocol, where he highlighted the challenges faced by cryptocurrency developers due to existing regulatory efforts.

Buterin pointed out a perplexing phenomenon in crypto regulation, particularly in the United States, where projects that offer vague references to potential returns or engage in activities devoid of utility can operate without repercussions.

However, when developers attempt to provide clear explanations of returns or promise certain rights to their customers, they are often penalized for being categorized as securities.

Buterin referred to this situation as “anarcho-tyranny,” emphasizing that this gradient of incentives is more detrimental to the industry than anarchy or tyranny alone.

Bad Actors Contribute to Anarchic Side of Crypto

The prevalence of bad actors, scammers, and baseless hypesters on social media and sharing platforms contributes to the anarchic side of the industry.

To combat this, Buterin previously proposed three recommendations aimed at addressing the problem of “useless” cryptocurrency products and services.

These suggestions include limiting leverage, implementing audits and transparency measures, and introducing knowledge tests to regulate usage.

The practical implementation of cryptocurrency knowledge tests at a regulatory level or in individual and corporate settings remains uncertain.

However, it is likely that policy measures will be necessary to impose limitations on leverage within cryptocurrency projects and establish requirements for auditing and transparent reporting.

Unfortunately, the sentiment within the cryptocurrency community suggests that the United States has a disproportionately high number of cryptocurrency users but lacks a clear and consistent approach to regulation.

Buterin said he prefers a regulatory environment that provides greater protections to companies and projects with long-term visions and plans.

He believes that issuing a token without a clear narrative explaining its long-term economic value should carry more risk.

Buterin also acknowledged that achieving a regulatory framework that benefits the cryptocurrency industry will require sincere engagement from both regulators and industry participants.

The collaboration between these two parties is crucial to fostering an environment that encourages innovation while safeguarding investors and users.

Buterin Voices Concern About Complex Layer 2 Solutions

More recently, Buterin also voiced his concerns regarding overly complicated Layer 2 scaling solutions.

At the time, the Ethereum mastermind highlighted the potential risks associated with complex Layer 2 networks and urged for a more balanced approach in the development of blockchain ecosystems.

In the blockchain community, there is a prevailing belief that Layer 1 networks should prioritize simplicity to minimize the risk of critical bugs and attack vectors.

Consequently, the responsibility for handling more complex features falls upon Layer 2 networks, which are designed to provide scaling solutions.

These networks bundle transactions executed on a separate network and submit them in batches for validation on Layer 1, enhancing throughput and reducing transaction fees.