According to the usual definition, cryptocurrency is "digital or virtual currency protected by encryption technology". Because of the use of encryption technology, it is "almost impossible to be forged." The manufacture of cryptocurrency is usually decentralized because it is "based on blockchain technology- a mandatory distributed ledger." "Cryptocurrency" is created by a completely different computer network, which aims to replace legal currency as a payment tool and realize the purpose of convenient transactions around the world. Like a legal currency, their values fluctuate with the total demand and supply.

The most famous cryptocurrency is Bitcoin. Goldman Sachs succinctly described it as being conceived in 2008 and launched by an unidentified programmer in the following year. Based on mathematical proofs, "miners" all over the world can use software programs to produce cryptocurrencies following mathematical formulas.

Because the total amount is limited, as the number of Bitcoins in circulation increases, mining becomes more and more difficult. Bitcoin can be traded, and it can also be used to buy goods and services. All Bitcoin transactions are recorded in the "blockchain", and the blockchain is a transparent ledger for every Bitcoin transaction maintained by miners.

As a currency, the distinguishing feature of cryptocurrency is that it is directly used in goods and services transactions, and its main use is as a payment method. As a program algorithm, the coin has a broader infrastructure than the token. Both coins and tokens are used to define the value of the blockchain. A coin is a unique digital currency based on its own independent blockchain, and a token is established and hosted on the existing blockchain. The difference between cryptocurrency and traditional currency backed by national sovereignty is not in the form of digitization. In fact, many governments in the world are considering issuing digital currencies. Fundamentally speaking, what distinguishes a currency from other payment methods is the quality of the community behind its issuance, the government, or other institutions.

Cryptocurrencies issued by non-sovereign communities may require standardized supervision for three main reasons:

First of all, cryptocurrency is a barbaric form of Western trading. The failure rate of cryptocurrency is very high. Supervision can protect investors and other related personnel;

Secondly, not all cryptocurrencies are as decentralized as assumed, and some currencies have serious problems in terms of transparency and legitimacy;

Finally, unlike other general applications of blockchain technology, the distinguishing feature of cryptocurrencies is their desire to become legal currency. Since the desire of most cryptocurrency communities is to establish a currency equivalent to legal currency, the use of currency should be distinguished and regulated from technology.

In addition, the development of the cryptocurrency field is very rapid. In June 2019, Facebook announced plans to launch Libra, an encrypted stable currency. This announcement has aroused great attention from all over the world, as well as a hearing in the U.S. Congress and concerns about national security. As a technology, Libra may look more like a token than a standard cryptocurrency. The design of Libra makes it too closely connected with the promoters, making Facebook’s proposal look more like a token rather than a dollar.

Cryptocurrencies such as Bitcoin were previously mined and traded by communities closely related to the generation and transfer of Bitcoin. Today’s companies may seek to generate and trade their own cryptocurrency. Just like the Libra created by Facebook, this currency created by non-traditional sovereign communities is a special and interesting part of the current regulatory system, and it is also a challenge that the regulatory system needs to solve.

Non-sovereign legal tender needs to be regulated.

Cryptocurrencies are taking action to develop the institutional structure to follow, but it does not mean that they will achieve inevitable success. Ironically, the more cryptocurrencies do in institutionalization and stability, the smaller the scope of the current regulatory regime will be. Bitcoin is actually more like US dollars used to buy tickets for trade fairs rather than tickets themselves. Our regulatory system only works in the sandbox of the fair. It regulates the sale of tickets as securities, as long as they are linked to the efforts of the promoter (fair operator) or a third party and it regulates fair tickets as commodities, as long as they can be exchanged with commodities of the same quality and value at the fair.

However, where are the dollars used to buy tickets for the fair? There is a big loophole in the supervision system. We assume that the issuance of currency is supervised by the sovereign state behind it. What if it is issued by a company or other autonomous agencies? Currency issued by non-foreign communities should not be ignored by our regulatory system. In fact, what should be emphasized is that the non-sovereign group issuing cryptocurrency may be a for-profit company or an online self-defined group such as Bitcoin.

Lat’s start with the discussion of why we should regulate cryptocurrencies. Most people in this field now hope to increase the stability and trust of cryptocurrencies through government supervision. If we want to have cryptocurrencies, we should regulate them, but we may need to develop a new legal category of non-sovereign legal tender.

We need to rethink the orthodoxy established based on the observation of community interests and organizational heterogeneity, so as to liberate ourselves from “a slave of some defunct economist.” The same is true of crypto community currencies.

As a micro form of government, companies may adopt traditional actions of government such as currency issuance. This is a new problem for companies-- the company is a “wreathed Leviathan”. The company is actually a “replica” of the country, a chained behemoth, which has legal personality and legislative power like a country and is authorized by the state to manage enterprises.

Effectively supervising the entry of companies into the cryptocurrency field, especially when the U.S. dollar has been most directly challenged by the digitization of other traditional sovereign currencies, may be an opportunity for the U.S. government to shape the future of the international financial market.

The US regulatory system is seriously lagging behind in regulating non-sovereign legal currencies. We should realize that cryptocurrency is a newly established form of currency. In this process, we need to evaluate the organizational quality of the autonomous community behind the cryptocurrency which has appropriate structures, procedures, and incentives. Crypto community is developing its own currency, and our regulatory system must catch up.