Ethereum’s outspoken co-founder, Vitalik Buterin, recently expressed his frustration over the current state of cryptocurrency regulation and offered up a surefire solution to the problem.

Responding to a user on Warpcast, a social media platform built on the Farcaster protocol, Buterin described a situation where current regulatory efforts have essentially painted good-faith cryptocurrency developers into a corner:

“The main challenge with crypto regulation (esp in the US) has always been this phenomenon where if you do something useless, or something where you’re asking people to give you money in exchange for vague references to potential returns at best, you are free and clear, but if you try to give your customers a clear story of where returns come from, and promises about what rights they have, then you’re screwed because you’re “a security.” The incentive gradient that this "anarcho-tyranny” creates ends up worse for the space than either plain anarchy or plain tyranny.”

Anarchy

On the anarchy side of things, there appears to be no end to the glut of bad actors, scammers, and baseless hypesters proliferating on social media and sharing platforms.

Buterin previously conjured three recommendations purported to be able to solve the problem of “useless” cryptocurrency products and services.

These recommendations include limiting leverage, requiring audits and transparency, and gating usage with knowledge tests.

While it’s unclear how cryptocurrency knowledge tests could be implemented at a regulatory level or administered at the individual or corporate level, it would likely be a matter of policy to place limits on cryptocurrency project leverage and institute auditing and transparency reporting requirements.

Tyranny

Unfortunately, the cryptocurrency community's sentiment seems to be that the U.S. has both an outsized number of cryptocurrency users and an approach to cryptocurrency regulation that could best be described as nebulous or uneven.

Buterin says that rather than offer the most protections to companies and projects without a long-term vision or plan, he would “much rather see us move to the opposite situation, where issuing a token without giving a clear long-term story for why it will maintain or increase in economic value is the riskier thing.”

However, Buterin also alluded that implementing regulations that serve the cryptocurrency industry is only part of the battle:

"Actually getting to this will require good-faith engagement, both from regulators and from industry.”

Related: Vitalik Buterin endorses TiTok AI for onchain image storage