a16z: The market needs rules, and cryptocurrency is no exception

Chainfeeds Guide:

The free market is not unrestrained chaotic competition, but a structured system in which individuals can voluntarily exchange based on reasonable expectations of fairness and security. Without basic protections, markets will collapse; without security guarantees, uncertainty will drive away serious investors and legitimate businesses, leaving only speculators and bad actors.

Source:

https://a16zcrypto.com/posts/article/markets-need-rules/

Author:

a16z

Opinion:

a16z: As the U.S. government begins to recognize the value of blockchain technology, the key question has shifted to how best to utilize it. Some may advocate for a completely laissez-faire regulatory environment, but that would be a mistake. Both history and economics show that prosperous markets require clear and consistent rules, and the crypto market is no exception. To some extent, resistance to centralized authority is in the DNA of crypto. The protocol designed by bitcoin creator Satoshi Nakamoto was meant to bypass financial intermediaries and envision a currency not dependent on government or institutional control. Many early adopters also embraced a spirit of radical individualism, similar to the philosophies of amateur computer clubs, the open-source software movement, and early cryptography advocates. But if crypto is to realize its true potential, it must be widely accepted and integrated into everyday commerce. Entrepreneurs and consumers need confidence in market rules that both guard against fraud and ensure fair access. Without this confidence, people will not actively enter the market, let alone use crypto in daily transactions. The so-called free market is not unrestrained free competition, but a structured system that allows individuals to voluntarily exchange under reasonable expectations of fairness and security. Without basic protections, markets will collapse; without safety boundaries, investors and compliant businesses will exit, leaving only speculation and malicious actors. The crypto market should operate like a stable computer, not become a speculative casino. Economists have long argued that government plays an important role in markets, setting guardrails to promote prosperity. Adam Smith believed that property rights allow people to secure the fruits of their labor, and that the government's duty is to ensure "tolerable administration of justice" to protect property rights. Hayek emphasized that government should uphold the rule of law and avoid arbitrariness. Friedman agreed that government needs to enforce contracts and protect citizens from harm. De Soto pointed out that the lack of clear rules and property rights leads to dead capital. Recently, Paul Atkins, the new chairman of the U.S. Securities and Exchange Commission (SEC), also stressed that regulators should provide minimal but effective regulation to protect investors while allowing businesses and entrepreneurs to thrive. Therefore, the regulatory goals for crypto should include four points: First, predictability and stability—entrepreneurs need to know the rules that apply to their business, investors need certainty, and consumers need trust in transaction security. Second, property rights protection—blockchain excels at confirming ownership through technology, but the legal framework must reinforce this. Third, transparency and information clarity—buyers need to know what they are purchasing, and regulation should promote disclosure to help investors and consumers make rational decisions. Fourth, fair competition—rules should prevent monopolies, manipulation, and fraud, and coordinate with existing systems to avoid creating loopholes. These four points are the cornerstone of normal market operation. Today's crypto industry is not yet a fully regulated sector, but it is gradually moving in that direction. Over the past few years, crypto startups have faced a vague or even hostile regulatory environment. While blockchain performs well in internal property rights protection, the external legal framework has failed to support a healthy market. Take the SEC as an example: it has long sued crypto companies before establishing clear legal standards, forcing entrepreneurs to passively respond in an unclear regulatory environment. This has created uncertainty, suppressed innovation, and allowed bad actors to operate in gray areas. In addition, many regulatory policies are based on the traditional financial system, directly treating blockchain assets as a type of security or commodity. But crypto is much more than finance—it is also an internet infrastructure. Effective regulation must balance both aspects, ensuring financial compliance without stifling technological development. In the future, there is a need for frameworks including token classification, standards for evaluating decentralization and disintermediation, consumer protection, tax guidelines, and how legitimate businesses can operate compliantly. These are not radical or unprecedented demands, but rather the application of long-understood market principles—stability, property rights, transparency, and fair competition—to the crypto field. Only in this way can the potential of crypto truly be unleashed.