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Currency Regulation By Means of Monetary Policy
Currencies are regulated by a central bank's monetary policy. This monetary policy usually follows macroeconomic objectives of the respective country or monetary union. Hence, the central bank defines an Official Cash Rate (OCR), at which it lends money to commercial banks that then lend to final customers at their own rates. By means of increasing or decreasing the OCR, the central bank can therefore influence inflation. This in turn has a direct impact on the country's currency, which influences the general economy.
Why Cryptocurrencies Cannot Be Regulated
Cryptocurrencies have an underlying code, with a set increasing rate of the total monetary supply. It is not possible to change this code or the inclination rate. Furthermore, cryptocurrencies do not represent a single country's economic interest. They are operating across all borders and only require Internet access. Therefore, cryptocurrencies cannot be regulated.
So What Do Regulators Do?
Regulators do not care a lot about cryptocurrencies yet, as their user base still is relatively small. Nevertheless, with increased user numbers the attempts to regulate cryptocurrencies are likely to increase. The only possibility for regulators to have a hand on cryptocurrencies is the regulation of providers of cryptocurrency services. Nowadays, these service providers are regulated as any other financial service provider, depending on the country they are located in. Nevertheless, thanks to the decentralized and non-physical attributes of cryptocurrencies, services can be provided from anywhere in the world with not much more than a regular laptop. You see how difficult it will be for regulators to actually have any influence on cryptocurrencies. We are excited to see how they will be able to impact cryptocurrencies in the future.
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