Cryptocurrency represents a seismic shift in how we conceive of value and ownership.
Yet most regulations treat digital assets as if they are traditional property.
This misunderstanding causes problems.
Laws must recognize crypto as knowledge rather than physical possessions.
You Don’t Own Coins – You Know Keys
Unlike cash, cryptocurrencies have no physical existence.
There are no actual “coins” stored in a wallet.
Cryptocurrency derives its entire value from the knowledge contained in private keys and records on blockchains.
If your wallet is hacked, no funds are literally stolen.
The coins remain on the blockchain.
What is compromised is exclusive knowledge of the private key controlling those coins.
Without your keys, the funds cannot be moved.
Seed Phrases Grant Access, Not Ownership
Wallets don’t truly hold cryptocurrency.
They store the seed phrases that can generate your keys and thus grant access to coins on blockchains.
Knowing the 12 or 24 words in your seed phrase means you can access your crypto – regardless of where it resides on the internet.
Think of a seed phrase like the master keycode to a series of safety deposit boxes holding your funds.
The boxes themselves aren’t in your house, but you have the secret knowledge to open them.
New Regulations Must Recognize Crypto as Knowledge
Laws based on “possessing” or “storing” cryptocurrency fail to comprehend its essence as knowledge.
When regulations treat crypto like physical property, unintended consequences occur.
Rules about transmitting money don’t map neatly onto sending non-custodial crypto that remains on a user’s device.
And concepts of custodial ownership don’t apply cleanly when wallets only provide access to a shared ledger.
The Bottom Line
Lawmakers worldwide must rethink outdated frameworks to effectively regulate cryptocurrency without hobbling innovation.
Recognizing crypto as knowledge rather than property is the critical first step.
The technology’s potential blossoms when based on true understanding.
Connor
Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.