Regulators around the world are cracking down on cryptocurrencies. China has banned them. The United States is considering a range of measures aimed at reining them in. The Bank of England is developing capital requirements for financial institutions that hold them. But, far from spelling disaster for the crypto industry, regulation is vital to its long-term prospects.

The crypto market’s development began with what can best be described as the “product innovation” stage. Blockchain technology enabled people to approach old questions (What is money? How can art be created and valued?) in new ways. This resulted in highly visible applications, such as virtual currencies and tokenised artworks. But it also enabled less glamorous innovations in a wide range of areas, from tracking container shipments to improving the integrity of health-care records.