This isn't wrong, but there is a counterargument: bad chases out good.
If you let scams run rampant, eventually the whole ecosystem becomes associated with scams and the good money and good players just leave.
This is the #1 risk to the largely unregulated cryptocurrency ecosystem. Many people already associate anything cryptocurrency with scams, or even equate the two. Legitimate value creating industries and legitimate players tend to avoid the whole space. Many people refuse to even look at cryptocurrency and block chain oriented technology for fear that being linked with the term will make them look "scammy."
A major objective of all this regulation is to retain US dominance in global finance by protecting US markets' reputation as (relatively speaking) solid and safe.
A good analogy is a "bad neighborhood." It takes only a small percentage of residents in a neighborhood committing street crime (far less than 1%) coupled with police neglect to label a neighborhood "high crime" and "bad," a label that will stick for decades and depress the whole area. Once a neighborhood carries such a label it often takes heavy handed police action or a complete tear-down / rebuild of the area to shake it.
Sure, and this is a major factor behind the number of deaths among drug users too. Bad product such as opiates cut with fentanyl or "bath tub crank" methamphetamine with nasty contaminants chases out purer (and thus lower margin because it's harder to make) product.
(I'm not advocating use of these drugs, just pointing out that less harm would be done if they were pure instead of nasty street jank.)
If you let scams run rampant, eventually the whole ecosystem becomes associated with scams and the good money and good players just leave.
This is the #1 risk to the largely unregulated cryptocurrency ecosystem. Many people already associate anything cryptocurrency with scams, or even equate the two. Legitimate value creating industries and legitimate players tend to avoid the whole space. Many people refuse to even look at cryptocurrency and block chain oriented technology for fear that being linked with the term will make them look "scammy."
A major objective of all this regulation is to retain US dominance in global finance by protecting US markets' reputation as (relatively speaking) solid and safe.
A good analogy is a "bad neighborhood." It takes only a small percentage of residents in a neighborhood committing street crime (far less than 1%) coupled with police neglect to label a neighborhood "high crime" and "bad," a label that will stick for decades and depress the whole area. Once a neighborhood carries such a label it often takes heavy handed police action or a complete tear-down / rebuild of the area to shake it.