Is More Government Oversight Actually a Good Thing for Crypto Investors?

While cryptocurrency remains widely unregulated in many parts of the world, tighter restrictions are coming for crypto investors, including in the U.S. This has raised both concerns and questions from investors.

While some recognize more restrictions on crypto investing (such as stricter tax reporting requirements) as a means of lending greater legitimacy to digital assets like Bitcoin (BTC -3.89%), others see enhanced regulation in a less positive light. In this segment of Backstage Pass, recorded on Dec. 20, 2021, Fool contributors Jason Hall and Rachel Warren discuss. 

Jason Hall: To me I think broadly, the more this thing comes public, comes to light, I think it's probably a positive and helps legitimize cryptocurrency. Let's be honest guys for the vast majority of the world, cryptocurrency means Bitcoin. Anywhere in the world that people have Internet access, people know what Bitcoin is.

They know what's cryptocurrency. They might not know anything else, they might not know what anything means beyond that point. They might not know a single other cryptocurrency name. Except maybe Dogecoin, but seriously, they probably don't know any of them.

They really don't. But people everywhere in the world know what Bitcoin is. That is something guys, that is something. I wanted to throw out a couple of interesting numbers just to put some context on this.

Gold, depending on the exact value is $9 or $10 trillion globally. That's about how much all the gold in the world's worth. I think it's like $9.3 trillion or so.

Yesterday I didn't look at gold prices today. That's giant, and here's the thing, gold has utility value for jewelry and other consumer goods and some industrial use, certain industrial applications. There's all that, right? But at the end of the day, any commodity sells for what the highest bidder is willing to pay and for gold, that's gold speculation and people holding gold as an asset.

All of that gold that is held, most of the people hold through trusts. They have a brokerage account that lets them by gold shares or units in these trusts but there's real gold on the other end.

Somebody's got to have that gold and somebody has to lock it in a safe and somebody has to pay armed guards to guard the real gold that's worth billions of dollars of these trusts possess. So there's fees and there's costs and all of that.

Then you have that asset, you want to convert it to something that you can liquidate, that you can actually spend money. You want to turn gold into money, it takes days to do it. You can sell it, but then you've got to wait for the transaction to clear and then you've got to transfer that out of your brokerage into some spending account and wait for it to clear there and then a week's gone by and hey, you finally got money.

For a lot of people around the world Bitcoin answers that. It's a digital-first asset, so you don't have to pay somebody else to lock it and have armed guards. There's digital examples of that same thing, using Coinbase and some of these other companies but it's just a different level. It's a digital-first asset, it lives digitally, it's secure, it's finite, and people trust it and everybody knows what it is.

I see no reason why it can't continue to be the digital-first asset that replaces gold. I really think that's going to be the case because you know what you can do if you need to get money? Use Bitcoin as money.

There's tax implications and all that stuff, which you don't have to wait a damn week and turn it into dollars or euros or whatever you want to do to use it. It's ready to use immediately. I think people under-appreciate that.

For a lot of people and a lot of the world, they need something that they can rely on and they can't rely on their native currency. Gold's not even a choice. There's millions of people in that boat. I think this moves us closer to being more legitimate for more people. I'll get off the soapbox now I promise. [laughs]

Rachel Warren: No, I agree. I was thinking about the story I saw a year ago about a guy. He had hundreds of millions of dollars in Bitcoin. I don't know if you remember this story and he got locked out of this digital wallet because he couldn't remember the password.

Hall: Yeah.

Warren: He had only so many days to find it. Anyway, it just made me think of that.

Hall: Those are things that are really challenging with crypto.

Warren: That doesn't happen with other types of assets.

Hall: You go to your bank or you call them and they unlock your password.

Warren: You imagine you have millions and I can't access it because I forgot my password.

Hall: There was this story about the guy that had a wallet on a computer hard drive that ended up going to the dump. [laughs]

Warren: Oh my gosh.

Hall: They were going to split the proceeds with the waste company. If the waste company would let them, they were going to take on all the costs to go find it and then split the proceeds with the waste company.

The waste company was like, no. My guess is they probably had some people going in at 2 a.m. looking for that thing.

Warren: Like they go in the dark of night with flashlights looking. [laughs]

Hall: Exactly.

Warren: There's trucks coming in, yeah wow.