Can't Beat Crypto Regulators? Educate Them
Crypto industry players urge each other to focus more on educating regulators to avoid overregulation and help authorities to foster financial innovation.
According to Dave Hodgson, Chief Investment Officer at NEM Group and Managing Director at NEM Ventures, “one primary obstacle that we are facing going into 2021 is regulations that remain inconsistent and often unclear across national boundaries.”
However, some major companies are working with regulators in order to help them shape a more friendly environment, hopefully, not only for themselves.
For example, the CEO of major crypto exchange Binance, Changpeng Zhao, hopes for more regulatory clarity this year and expects to see "more positive results" of their efforts of working with regulators and helping them make better tools to improve compliance.
“The natural evolution of financial markets requires that regulation must be imposed to protect those that don't really understand the risks,” argued Monica Singer, the South African Lead for Ethereum-focused major blockchain company ConsenSys. As the regulators understand the products and the risks, they will be able to issue regulations and taxes where it’s applicable, she said, adding that taxes will “have to be imposed,” given that any transaction in the production of income should contribute to the government finances – as is the definition of taxes.
Bo Oney, Chief of Compliance of Bitcoin ATM operator Coinsource, stressed that regulation “should be crafted to foster continued financial innovation, without damaging the value accrued by consumers or investors. He hopes to see “a closer negotiation between regulatory authorities and virtual assets service providers in the near future.”
Meanwhile, Matthew Gould, Unstoppable Domains founder and CEO, told Cryptonews.com that it seems like “there's going to be another attempt to over regulate crypto” this year, but that “hopefully the crypto industry can come together to educate lawmakers and ensure innovation isn't halted from overburdensome regulation on our young industry.”
"Industry leaders will have to be proactive in educating policymakers on the ins and outs of these technologies to ensure that the regulations introduced help the space continue growing," added Erick Pinos, Americas Ecosystem Lead at Ontology (ONT).
However, while regulators are still learning, the industry might see some old-fashioned attempts to regulate this nascent space that targets the foundations of the traditional financial system.
'A flurry of challenges'
Philippe Bekhazi, CEO of stablecoin platform Stablehouse estimates that "we will see a flurry of regulatory challenges in both the US and EU markets, particularly in relation to AML/KYC compliance.”
“Overly onerous regulations will choke the free markets, and prevent the self-reporting that has ultimately bolstered the likes of Tether. Market corrections already present a high enough barrier, and any additional hurdles will discourage competition in the free markets,” Bekhazi warned.
Meanwhile, Anthony Lauriola, Chief Operating Officer at blockchain portfolio company Dan Holdings, which is currently in the process of expanding its scope globally and working to refine its know-your-customer (KYC) requirements, estimated that enhanced regulation is likely coming, especially in the US, while more North American cities and local governments may adopt payment of taxes in crypto. Furthermore, the rest of the world will “actually take a more relaxed role to regulation which might foster more adoption in emerging markets for crypto than more established ones,” he said.
Speaking of the US, it is important to note the policy lines already being drawn in the sand for the 117th Congress, Jackson Mueller, the Director of Policy & Government Relations at financial services firm Securrency, said. The letter authored by Democrats on the House Financial Services Committee to the Joe Biden Administration “sets a floor for what the committee is interested in exploring and what lawmakers are concerned about,” and in it, Democrats recommend rescinding recent Office of the Comptroller of the Currency (OCC) guidance on stablecoins and cryptoassets, he said.
Therefore, Mueller argued that we’re likely to see greater scrutiny of stablecoins.
Also, Dave Hodgson argued that a few nation-states are trying to regulate against the space, such as the UK with its recent anti-derivatives moves.
“Ultimately, those kinds of regulations will fail and consumers will move around being told what they can and can’t do with their finances. While there are some regulatory steps moving in the right direction, this remains a hurdle to the growth of the space. In my view the faster we move towards not having the government in our money, the better off society will be as a whole,” he said.
DeFi and 'the last legs' of the Wild West
Meanwhile, Rachid Ajaja, CEO and Founder of AllianceBlock, an organization building a globally compliant, decentralized capital market, stressed that as the DeFi (decentralized finance) sector is growing, the new regulation is needed to bridge traditional finance, TradFi, and DeFi.
“Thankfully, we are seeing an increasing appetite among regulators in this sphere. All of these elements will have a great impact on blockchain and more specifically DeFi throughout 2021,” he said.
Also, Andrew Kessler, tech entrepreneur and cryptographic expert, said that a number of jurisdictions, such as Malta and Liechtenstein, are maturing when it comes to regulation at a government level. It is the governments who have the power to either hinder or foster the growth of revolutionary technologies, he said, and this will be a key factor for long-term growth.
“While I don’t think regulators will accept DeFi offerings in their current form, we will see evolution and adaptation as regulators respond to more high-risk type asset classes. It’s an exciting time for the digital assets space — we’ve undoubtedly come a long way, but we still have a long way to go,” he said.
And as Sinjin David Jung, Managing Director of IBMR.io (International Blockchain Monetary Reserve), concluded, “the wild, wild west of crypto is done” and that “we’re on the last legs of that.”
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