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The catch here is that regulations could go both ways; overly stringent regulations could turn people off on the idea, while proper regulations could legitimize crypto in a way that citizens know that they're engaging in something real, and not some bubble crap that FUDers love saying.
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There is also another catch. Introducing regulations increases the demand for certain
professions (e.g. tax advisors, lawyers). People in these professions are therefore
heavily incentivized to lobby for the continuation or even expansion of regulative efforts.
There are several cases where a finance minister in a country has first introduced
strict regulations and later switched to the very companies that were affected by his laws
in order to advise them on how to circumvent the regulatory rules that were
created during his term as minister.