Why Should Cryptocurrencies Be Regulated? An Analysis of Bitcoin

Abstract

Purpose: The study explores the rationale behind advocating for the regulation of Bitcoin, specifically focusing on the potential threats and risks Bitcoin poses to the financial systems and the economy at large. However, unlike prior descriptive studies, this paper addresses the gap by critically synthesizing regulatory, technological, and economic risks across multiple jurisdictions. Design/methodology/approach: The study followed a qualitative approach in conjunction with a comprehensive review of already existing literature on Bitcoin and other cryptocurrency regulations to ensure that findings were contextualized. A structured qualitative content analysis was employed, guided by predefined inclusion and exclusion criteria, thematic coding, and comparative evaluation of regulatory responses. Findings: The study revealed that the lack of Bitcoin and other cryptocurrency regulations results in market manipulation and contributes to eroding trust in the broader financial system. Furthermore, the lack of a clear regulatory framework for Bitcoin results in tax evasion, the creation of investment scams, and other illicit activities such as money laundering. Three dominant risk categories emerged: (1) anonymity-enabled criminality, (2) fiscal transparency and tax non-compliance, and (3) investor protection failures arising from volatility and scams. These themes highlight the structural misalignment between decentralized digital assets and existing regulatory models. Originality/Value: This study addresses the gap between technology and regulations. These technological advances do not merely challenge the monetary system but also the regulatory system. The study contributes a structural analytical framework for understanding regulatory gaps and proposes policy directions for licensing, AML/KYC controls, and consumer-protection mechanisms tailored for cryptocurrency environments.