Governments are known to pass bad regulations that harm industries as well as implement rules that often lead to unforeseen, negative results — consequences that significantly deviate from the new rule's original intent. And that's a major reason why software engineers developed Bitcoin (BTC) and other trustless mediums of exchange in the first place: to make snooping intermediaries obsolete when it comes to blockchain-powered transactions. A group of Bitcoin and finance experts this week warned the U.S. Securities and Exchange Commission (SEC) and policymakers to not enact short-sighted rules that, instead of helping, actually harms the burgeoning $220 billion cryptocurrency market and diminish the advantages that crypto and blockchain provide. Bitcoin core developer Bryan Bishop, former Morgan Stanley managing director Caitlin Long and other prominent experts wrote in Sept. 19 joint letter that new regulations passed by policymakers and bureaucrats who don't possess full understanding of fintech can introduce risks into crypto and financial markets that would otherwise not exist. Bad rules will diminish the innovation's benefits and harm investors along the way. The group also urges the SEC and policymakers (Congress) to modernize its regulatory framework which is lacking in its ability to properly govern digital assets. Bishop, Long and others said that the solutions are found in the technology itself, not in policy."Current SEC rules surrounding custody do not reflect the risks inherent in managing digital assets and do not use the technical strengths of the technology. These technical strengths have the potential to lead to a stronger, more robust custody environment," wrote the experts. "To better understand these possibilities, to build to strengths of technologies, and to not harm its advantages, we recommend that the SEC engage with those who are experienced with technology, such as cryptographic engineers, software developers, Bitcoin exchanges, smart-contract designers, blockchain developers, and existing digital-asset managers to ensure best practices are implemented." The experts urged the SEC and policymakers to customize new regulations and to make these appropriate for an innovative asset class that has unique strengths and features — and not to issue or implement blanket rules that are more suitable for traditional assets. Lack of congruence, they argue, will harm the industry and investors."We suggest that policymakers and regulators look at the advantages of the available technology and incorporate them into the rules and regulations instead of solely relying on present-day rules and regulations that were developed for traditional assets." They add, "Securities laws were initially written to apply to paper securities certificates, later adapted to book entry form, and now to digital representations of security entitlements recorded in centralized databases. They were not written with purely digital assets such as cryptocurrencies in mind." The risks include commingling of digital assets in custodial accounts which would create a gigantic incentive for hackers to steal. That's because Bitcoin and other cryptocurrencies are bearer instruments. A bearer instrument, like lottery tickets, means that the possessor of private keys always owns the coin, regardless if the funds were stolen, lost, mistakenly transferred, or received as compensation for illicit activities. Because digital coins were designed to remove third parties from transactions, it's imperative that regulators take these technological features into account. The experts also argued that regulators should not stifle crypto's ability to protect investors, as well as, give investors the freedom to cheaply move their assets. "We can establish secure models for digital assets that protect both the investor and the solvency of major financial institutions without sacrificing the convenience and innovation that the asset class can provide."