Singapore’s attempt to separate blockchain use and crypto won’t work: Vitalik Buterin

Singapore’s well-intentioned attempt at crypto regulation may not work, given its skeptical approach to the asset class, Ethereum co-founder Vitalik Buterin said in an interview with The Straits Times on November 20.

Buterin said he appreciates the city-state’s willingness to be supportive, but it may be for nothing.

“I definitely appreciate the amount of effort they’ve put into it and just their willingness to explore a lot of different types of applications and be supportive,”

Regulators around the world want to support new technologies but also find cryptocurrencies “weird and scary” at the same time, he said. The lack of understanding and fear of crypto means that regulators are trying to treat blockchain as a separate technology from crypto.

This is the case in Singapore, where regulators are trying to distinguish between blockchain use and cryptocurrency. India is trying to adopt a similar approach, while some Chinese regulators have already attempted to deploy non-cryptocurrency blockchains.

However, Buterin said there is a “tight connection” between blockchain and crypto, such that “you can’t really have one without the other.” He added:

“I think some of the regulators in China definitely tried to have one without the other, and the reality is that if you don’t have cryptocurrency, then the blockchains you’re going to have are just bogus and nobody’s going to care about them.”

However, regulators in Singapore are only trying to “discourage cryptocurrency speculation” without banning crypto outright, Buterin said. Although Singapore had previously positioned itself as a crypto-friendly jurisdiction, it has begun to tighten regulations in recent months.

Moreover, Buterin acknowledged that it can be “tough” for countries and regulators to strike a healthy balance between supporting new technologies without becoming a hotspot for bad crypto actors. But when it comes to balancing crypto regulation, “there are good ways to do it and there are bad ways to do it,” he said

After China’s crypto ban, many crypto firms fled to friendlier jurisdictions such as Singapore. But the “biggest risk of being friendly” is that the countries end up attracting people like Terra co-founder Do Kwon, who is being investigated for fraud in the wake of the Terra-LUNA collapse, Buterin said.

Do Kwon spent a lot of time in Singapore, and many people connected to the Terra-LUNA collapse. Buterin added:

“It is definitely true that if a country is not smart about it [crypto regulation], they can easily end up being stuck as the base for all Do Kwon people. And that is not necessarily something the country wants.

But on the other hand, I think it is certainly possible to engage productively and get many benefits.”

What the crypto community can do to discourage bad actors

According to Buterin, the Bitcoin community “automatically loves all the rich and powerful who support Bitcoin,” which is foolishness. Buteirn reiterated his criticism of El Salvador’s “top-down” Bitcoin adoption last year, saying the Bitcoin community was rejoicing in the news while ignoring the nation’s dire realities.

The community promoted El Salvador even though El Salvador’s President Nayib Bukele’s government is “not very democratic” and is not good at “respecting people’s freedom,” Buterin said. He added:

“It’s an example of the kind of mistake a cryptocurrency community can make to enable bad behavior.”

According to Buterin, the Ethereum community has gotten better at being selective about who it promotes and associates with. Also, when it comes to preventing bad actors, the most society can do “is to be active in supporting good things and opposing bad things,” he said.

Apart from this, regulators can put up guardrails and the community can “educate users,” Buterin said. But “there’s a limit to how much bad activity you can prevent” because the nature of the blockchain system requires it to be open to everyone.