It should be noted that Vitalik Buterin lately quite often shares his own opinion on various phenomena. For example, last week he spoke about the disadvantages of gold against digital assets. According to the developer, the precious metal is very inconvenient to use, in addition, investors have no options for its safe self-storage. Read more about Vitalik’s point of view in a separate article.

What will happen to cryptocurrency in the future

Regulation could make crypto more acceptable to mainstream financial institutions and legitimise it as an asset class. However, new regulations and policies could also change the industry’s fundamentals – especially in terms of censorship resistance and decentralisation. In Buterin’s view, it is the preservation of these principles that should be a priority.

Vitalik posted his reasoning on Twitter. Here is a translation of one of his quotes.

I don’t think we should be enthusiastic about the rapid adoption of large institutional capital. Regulation that leaves the cryptosphere free for internal action but makes it harder for projects to enter the mainstream is a far lesser evil than control that invades the core principles of the industry.

In other words, Vitalik believes it is more important to care about the key features of digital assets by the type of their independence from centralised authorities, as well as the absence of any blacklisting analogy. That said, there are already similar conversations within the niche.

Etherium creator Vitalik Buterin

According to Decrypt sources, in October the CEO of major cryptocurrency exchange FTX, Sam Bankman-Fried, published his views on the issue. He suggested introducing sanctions lists to crypto platforms, with control of the lists allegedly to be entrusted to the US Office of Foreign Assets Control (OFAC). In other words, the FTX chief advocated stricter oversight, with a centralised government agency actively involved in the crypto industry, which infuriated the cryptocurrency community quite a bit.

Overall, Bankman-Fried’s proposal expectedly sparked a wave of criticism in the cryptocurrency fan community. A few days later, he published a new Twitter thread, from which the following quote is worth highlighting.

Thanks to everyone who gave constructive feedback, comments and criticism… I’ve already revised my post a bit and will continue to do so. Special thanks to everyone who highlighted the essence of cryptocurrencies: economic freedom. The freedom to own your own assets, to own your own data, to create your own software.

Why Bankman-Fried did not understand this initially is unclear. However, given such statements, Sam is losing the trust of some in the cryptocurrency community, who see him as a danger to the entire industry.

FTX CEO Sam Bankman-Fried

As you can see, the issue of crypto regulation is a complex puzzle that is not easy to solve in a way that makes all investors feel good. This is also indicated by the conflicting views of influential people in the cryptosphere.

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According to a recent survey published by investment firm Fidelity, out of more than a thousand institutional investors, 16 per cent cited lack of clarity around crypto regulation as the main reason why they should not invest in it.

On the other hand, 81 percent of institutional investors surveyed believe digital assets play a role in their portfolios. In addition, 43 percent of professional investors said they would be interested in a Bitcoin ETF.

The full list of reasons that discourage some institutional investors from investing in crypto

Incidentally, there are problems with Bitcoin ETFs as well. Last year, the US Securities and Exchange Commission (SEC) approved several ETFs on the major cryptocurrency, but they are all based on its derivatives. The emergence of a spot ETF could significantly strengthen the industry’s position in the eyes of the big players, but so far this has not happened. The slowness of the SEC in this matter has even led to a lawsuit against the regulator.

Most interestingly, for Vitalik Buterin, the SEC’s hesitation to deal with a spot ETF for Bitcoin is not a problem. Here’s what he writes about it.

I’m even glad that the adoption of many ETFs has been delayed. The ecosystem needs time to mature before we get any more attention.

In general, Buterin divides the goals of “proper” crypto regulation into two categories: improving consumer protection and combating illicit financial flows. The latter, he says, applies to the entire industry, not just the decentralised finance (DeFi) sector. Specifically in the DeFi world, Vitalik disapproves of the presence of the KYC (Know Your Customer) mechanism.

KYC is the verification of a user's identity by their documents. The mechanism works in both traditional finance and crypto, but it is redundant in DeFi, says Buterin. According to him, KYC will not prevent a hacker from hacking into the decentralized protocol, but the mechanism only creates more inconvenience for a regular user.

At the same time Vitalik has nothing against KYC on centralized exchanges like Binance

There are more rules in DeFi, which could be more useful, believes Buterin. For example, limits on the amount of leverage a user can trade with, transparency in auditing project code, and testing users’ knowledge of the basic principles of decentralised finance. Vitalik also advocates the development of regulation in a way that further allows for zero-knowledge proof, a cryptographic principle that preserves confidentiality.


We believe that the digital asset industry should be regulated in a soft and modern way, while not jeopardising its key features. Accordingly, one can agree with Vitalik Buterin, while Sam Bachmann-Fried's previous proposals are still surprising. And the new comments from the head of the FTX crypto exchange have hardly helped the situation in perceiving his position.


What do you think about it? Share your opinion in our Millionaire Crypto Chat. There we will discuss other important developments in the blockchain world.