Why would that necessarily happen? could you make a more brief explanation?
Thanks!
Try to use your tiny brain to follow ok?
Because it increases liquidity .....
wow
You're ignoring the risks associated with this though.
The main "restrictions" on the exchanges will be that they're required to monitor who is buying and selling, and ensure that criminal organizations or sanctioned countries are not using the exchange. This could cause two major problems with BitCoin:
1. As of now, and for the foreseeable future, BitCoin is an inferior way of buying and selling legitimate goods compared to debit/credit cards. The only area of the market where BitCoin holds an advantage is with places like Silk Road. The problem this creates is that legitimate users will likely flock to the regulated exchanges, whereas criminal users will avoid regulated exchanges exchanges that are being monitored, and stick to unregulated exchanges.
This will create a supply/demand pricing issue with the unregulated exchanges. If I could buy 1 BTC from a regulated exchange at $600, or from an unregulated exchange at $600, a rational person would choose the regulated exchange every time. So in order to remain in business, an unregulated exchange will have sell BTC at a price below $600. This point will lead to one of two results.
1a. There are not enough people willing to purchase BTC from unregulated exchanges. The price on the unregulated exchanges crashes, and BTC becomes a horribly inefficient way to purchase illegal goods, or to get around government controls. As a result, any business relying on these unregulated exchanges will simply leave the BTC market.
1b. There are people willing to purchase BTC from unregulated exchanges, as they believe they can re-sell it to the regulated exchanges. The price between the exchanges would remain close, and businesses would stay in the BTC market. However, as a result, the government will almost certainly step in, and force the regulated exchanges to blacklist transactions coming from the other exchange, as investors between the two are merely acting as middlemen. Also, any investors caught taking advantage of the arbitrage opportunities between the exchanges will be at risk of Uncle Sam walking in and freezing their assets.
2. A lot of people buying into BitCoin as an actual currency as opposed to just people trying to make a quick buck are of the Libertarian mindset. They loved the idea of a currency that was outside of government control. A regulated exchange damages this. They would then consider both credit cards and BitCoin to be the same, and many would go back to using credit cards again.
Regulated exchanges bring safety and liquidity, but they also could cause the total market to shrink.