Reflecting on the events of recent weeks with the free-fall cryptocurrency markets, then starting to gather, dr. Paolo Tasca, executive director of the Center for Blockchain Technologies of the UCL, shows that there is an "urgent need" for regulation.
He says the huge price drop in recent weeks was "largely due to the hash war that started inside the Bitcoin Cash community and caused a tremendous Bitcoin sell-off to subsidize both sides of the "battle" – Bitcoin Cash ABC and Bitcoin Cash SV ".
The dott. Tasca states: "With the price of Bitcoin, which remains the reference point for the entire crypto-market, this decline is reflected in all the other sectors.
"Nobody knows if this downward trend will continue in the coming weeks or months, but events have shown that as long as the market remains so concentrated and the big miners remain unregulated, stability is very far".
The story begins almost 12 months ago, he says, when "we have reached the highest choice in the market." In general, in any market, irrational bubbles give rise to huge market movements when they explode. "
This happened in January 2018, but the market "seems to have not yet recovered from the bearish movement".
"These last events have further accentuated the nerves," he says.
"It's hard to tell people – who may have lost a lot of money for speculative actions or individual and opportunistic behavior – to calm down.
"Investors in digital currencies need to be aware of the risks incurred by cryptocurrencies, and they're a terrible value store – think of Bitcoin.
"Moreover, if it is true that an emotional mentality is even more harmful to the market, it can also serve as a warning to consumers and regulators, and has made it clear that regulation is increasingly urgent".
In predicting the future state of the market, he underlines that no one has a crystal sphere and "it has always been difficult to foresee the future evolution of the crypto-market".
"Bitcoin, in particular, has undergone several slowdowns in the past, including one long 2014 that lasted about a year, so this is not a new story for Bitcoin," he explains.
"But unlike four years ago, the blockchain ecosystem is now more developed, if instead of looking at the daily token speculations, we would rather focus on the adoption of blockchain technologies in the production sector, we could certainly say that blockchain technologies will probably achieve long-term momentum.
"It is very important to distinguish digital currencies from blockchain technologies, and we should not focus on the price of tokens, whose market valuation could be misleading, but rather consider the adoption of technology.
"In this respect, there are positive signs, such as the growing number of institutions, research centers and organizations willing to study and apply blockchain solutions."
He believes that market crashes are "genuinely good" while they cut away all the bad apples from the markets. Projects without real practical benefits "that only serve to get money from people and investors should not go out".
These are just market distortions that are currently unregulated and the same could be said of all illicit activities, he says.
"Blockchain is only a tool in the hands of companies and individuals: if it is used for good or bad it will always depend on its users", he adds.
"And if the public may be skeptical of the blockchain due to isolated cases of fraud or hacking, it should be remembered that this is a common feature of any technology in its early stage of development.
"Trust in technology will not be compromised because of this."
Need for regulation
The regulation, he says, is "always necessary, especially in markets that move at a fast pace". He recently wrote in a contribution (The Regulator & # 39; s Job: Ignore, Regulate, Kill, 2018), that after ignoring the blockchain for a decade, regulators have begun to adopt a "wait and see" approach.
The Financial Conduct Authority, for example, issued several "soft law" documents but did not impose any mandatory regulation.
"Given that market dynamics have yet to be explored, regulators are monitoring the situation closely, but are reluctant to take any action," he adds.
"If consumers are harmed, the risk is that legislators will appear strict rules that could end up killing not only rotten apples but also the entire industry.
"Events like the current hash war do not help in this sense." The private sector should cooperate with public authorities to forge the pillars of future regulation. "