In 2017, observers who for years believed that the cryptocurrency market had been extinguished were surprised to find it catching fire once more.

Even now, after the latest bull cycle has settled comfortably into bear territory, sentiment in the cryptocurrency community is endlessly optimistic.

It’s not surprising, given that ideas like Bitcoin survived periods of intense doubt and elation alike, and all signs point to the fact that it will continue to exist well into the future.

However, the crypto market does not endure because of some invincible decentralized quality or leverage over the traditional financial sector. It survives because regulators decided that it can—at least for now.

India and China’s recent clampdown made it clear that regulators can stop cryptocurrencies from spreading, if they so desire. Since 2018 gave many financial authorities an unignorably volatile demonstration of how threatening cryptocurrency can be to investors, they have been subtly pumping the brakes in various ways.

As such they’ve turned down the temperature of the markets and instituted a “slow burn” for cryptocurrency going into 2019. With the notion that regulators could snuff it out, if that was the goal, questions about their motivation for allowing the technology to persist also arise.

Exerting Pressure on Exchanges

Cryptocurrency’s slow, yet controlled landing in the traditional financial industry is a result of the balanced approach that regulators in major economies have taken. With an expert touch, policies about cryptocurrency must be not so heavy-handed as to stifle innovation yet strong enough to reduce risks to the legacy fiat-based (off-chain) economy. Beyond the preservation of their power, regulators’ long-terms goals for blockchain and cryptocurrency are unclear, but the way that certain restrictions have been imposed shows what direction blockchain is being herded.

Some of the major crypto exchanges, for example, represent the biggest tap on the flow of fiat money from the traditional economy into the blockchain. Since the beginning their role has been to let cash spill into the crypto market, swelling token values and creating a lucrative game of speculation for traders everywhere. However willing regulators are to let people invest their money, they haven’t given express permission in a few key ways. In the short-term, their attempts to steer exchanges are about protecting investors, but also about keeping the flow of cash into crypto to a drip rather than a pour.

The first way that regulators have wielded their influence over exchanges was to offer alternative financial instruments that allowed those who really wanted to trade Bitcoin to do so safely. Institutional exchanges like the CME and CBOE offer Bitcoin futures contracts, which was expressly permitted by regulators because they knew it wouldn’t exacerbate Bitcoin’s risks. Traders can now see Bitcoin price online everywhere, even at the oldest financial publications. Futures aren’t settled in the underlying asset and allow shorting and leverage, which bring mature elements to volatile Bitcoin.

Another hit was to demonstrate that it was easy to cut off banking relationships. Banks must listen to regulators even if exchanges don’t, so to keep the lights on and the balance sheet healthy, exchanges were mandated to collect detailed customer identity information and engage in anti-money-laundering practices. Regulators became omniscient about how much money was going into the crypto market, and from there, and used this data as a foundation to tax crypto gains heavily.

Crypto Crackdown Moves to Blockchain Innovation

Besides keeping a close eye on how cryptocurrency permeates into the retail investment world, regulators have also stifled new ideas in the blockchain industry that threatened to help the young market slip its leash. With crypto exchanges presently the only conduit for fiat into the young market, and futures a dud, it’s no wonder that regulators are hesitant to introduce ETF assets that would flip everything on its head immediately.

Allowing a physically settled Bitcoin contract to be purchased through exchanges in major markets would directly contrast the SEC’s efforts until now. Demand for Bitcoin would suddenly be unleashed from entities in the traditional market and rock the boat significantly for other asset classes, which draws parallels with how regulators handled ICO tokens over the last year as well. Tokens are (or were) sold as part of a blockchain project’s crowdfunding effort. It’s obvious that regulators viewed the groundbreaking concept as a shortcut to its own more structured lending and venture capital models, which have more protections in place for investors but also impede innovation. ICOs could have been banned outright in the US, as in China, but instead the SEC did something rather clever.

Classifying ICOs as securities in many cases, and “suggesting” that projects wanting to issue tokens do so in a compliant manner has been a big reason for the dearth of ICOs recently, and more importantly accomplished its goal for stopping fraudulent projects. Though ICOs must now tolerate as much bureaucracy as any other company, blockchain or not, there’s no saying how permanent the current rules are. The very broad rules have also pressured the crypto community’s de facto leaders to come up with another solution called Initial Exchange Offerings (IEOs), which may present an opportunity for private infrastructure and methodologies to be considered compliant.

What Could Regulators’ Goals Be?

Make no mistake, regulators in countries that represent the majority of crypto demand recognize its benefits. Accelerated yet compliant fundraising could revitalize an economy by quickly launching new ideas and lowering barriers for investment opportunities while cryptocurrency can make cross-border payments more cost-effective. There’s no doubt that what blockchain leaders are doing can result in a significant economic boon.

Regulators may simply be delaying a harsher move, to avoid chasing away talent and investment in products that may one day help them. Bitcoin is barely a decade old, and its next decade will probably be spent being picked apart and appropriated by these very same entities while simultaneously being prevented from reaching critical mass on its own steam.

Whatever their reasons, regulators are out to protect individuals, and the fact that crypto is still growing under their watchful eyes is a positive sign.

Jim Hoffer is founder and managing director at Hoffer Financial Consulting. Follow him on Twitter.