Vitalik Buterin, co-founder of Ethereum, recently shared his views on encryption regulation and made shocking comments on the rejection of the application for crypto exchange traded funds (ETFs).

Buterin released a lengthy and controversial Twitter post on October 30, in which he said he was "happy" that regulators continue to refuse to encrypt ETFs. He believes that the encryption industry needs more time to achieve certain growth and maturity, because it is still in the early stage of attracting institutions to adopt due to the lack of a comprehensive regulatory framework.

Another potentially controversial point of view is that I do not think we should be fanatically chasing large institutional capital at full speed. In fact, I am glad that many ETFs have been postponed. Ecosystems need time to mature before we get more attention.

According to the software developer, before accepting the ETF, the encryption industry needs a regulatory model that can effectively manage the market and eliminate bad actors who use the space.

It is worth noting that Butlin's statement was issued when the US Securities and Exchange Commission (SEC) denied the application of several Bitcoin spot ETFs from major companies. Interestingly, Gray Investments, a global asset management giant, also applied to convert its Gray Bitcoin Trust (GBTC) into a mature ETF product, but was rejected. Then it began a legal struggle with regulators.

In addition to ETF, Buterin also commented on the supervision of the Decentralized Finance (DeFi) sector. He stressed that the implementation of the "Know Your Customer" (KYC) rule could not prevent hackers from attacking the protocol. He explained that since these rules only apply to the front end of the platform, they will not prevent hackers from writing code on the back end to interact with smart contracts.

"The idea of KYC on defi frontends seems not very meaningful to me: it will annoy users, but it has no effect on hackers. Hackers have written custom code to interact with contracts." The exchange is obviously a more sensible place for KYC, which has already happened, "Butlin said.

The co founders of Ethereum also suggested that front-end supervision could focus on limiting leverage, requiring transparency in audit, and limiting use through knowledge-based testing, rather than imposing minimum standards for net assets.

Butlin emphasized that protecting consumers and preventing bad people from transferring funds in the ecosystem are two key objectives of regulatory laws. He said that the problem of the second goal is widespread in the entire crypto payment ecosystem, including coin security, Bitcoin base and FTX, not limited to the DeFi ecosystem.

Butlin is not the only important industry person who recently commented on the regulation of cryptocurrency. Sam Bankman Fried, CEO of FTX's top cryptocurrency exchange, shared his regulatory objectives for the industry earlier this month. He said that cryptoverse needs clear supervision to protect users from fraud.