Cryptocurrency industry and legislature — who’s giving up?
Blockchain technology looks broadly and plans to change the way the digital economy looks today. The decentralization principle that underpins blockchain is to compound the basis for the internet if Web 3.0 gets successfully integrated. The development of decentralized finance has triggered the perception of decentralization as a reliable and applicable technology that can become the future of the internet, moving it from centralized servers to decentralized ground. Web 3.0 is meant to provide it.
Blockchain technology is so multidimensional that its emergence is regularly compared to the advent of the internet and its role in splitting the world into “before” and “after”. Additionally, there will be held an auction where the W3 source code data will be represented as an NFT, finally combining the three pillars of the future of the digital world — Decentralized Finance, Nonfungible Tokens, and Web 3.0. Though it sounds as real as ever, there come a few conditions for a smooth evolution and technological progress of the blockchain, one of them being a proper regulation system. Without things being fully regulated, it’s impossible to integrate blockchain into the everyday life of the masses as it happened with the Internet.
The spread of regulation
It’s clear that the absence of a solid regulative ground harms the cryptocurrency industry and hinders the evolution process. With the overall growth of the digital currency space and its fast integration to numerous other spheres of people’s lives, the interest in cryptocurrency from regulative authorities started to increase considerably at all locations where cryptocurrency is allowed. The wave of interest touched all possible turns of the industry including stablecoins, decentralized finance, non-fungible tokens, blockchain technology, distributed algorithms, digital wallets, etc. Yet, it’s unfair to think that it’s a red flag. The unfolding spread of regulation in crypto may be considered a positive sign that many investors and crypto companies can benefit from. Crypto may become a less risky and more secure space in the long run.
Yet, there are many obstacles in the way of successfully merging the cryptocurrency industry and current regulation system as the latter one is simply not ready enough to step forward. The regulation in finance as we know it today may appear too restrictive and obliging for decentralization and its core principles such as lack of a centralized authority and middlemen. If the regulation is integrated the way it is today, it will flash the industry back to its early days when there was no other option except centralized distribution of power. This is not the step towards a better future for crypto.
Therefore, we have come to the situation where the cryptocurrency space needs regulation to develop, yet can’t accept it in the current form that will linger its development. Thus, an additional set of measures must be taken to adjust legislature to the very special and fragile conditions it can exist under. For this, crypto-specific regulation must embrace both the interests of state regulative bodies and crypto innovators. The process of creating a regulative basis can’t be one-sided and must include professional opinions and insights of both parties — state and business — as the industry we are dealing with is relatively brand-new, highly innovative, and game-changing. Regulating crypto is an issue that must be treated with the utmost precision and thoroughness and, most of all, with a full readiness to change the traditional ways of regulating, the same way they were changed when it came to making up a whole new approach in the legislature with the advent of the internet.
It’s fair to overview the situation by collecting the opinions of the industry’s most prominent representatives. The main question in the agenda is whether the industry loses its hard-earned independence from the centralized approach if it gets traditionally regulated and whether it’s possible to find a solution and become regulated without harming the core principles of decentralization.
Agata Ferreira, Ph.D. Law, a member of Expert Panel at EU Blockchain Observatory
“Regulators are on a learning curve when it comes to blockchain in general. Legal and regulatory frameworks are developed incrementally and have been built to govern centralized and intermediated societal design within well-defined jurisdictional boundaries. Decentralized, disintermediated, and borderless blockchain networks challenge regulators who have also been taken by surprise by some blockchain innovations — for example, stablecoins.”
Cristina Dolan, founder, and CEO of InsideChains, vice-chair of MIT Enterprise Forum:
“The on-ramps and off-ramps for crypto are regulated by default because the exchanges that offer crypto-to-fiat conversions require to Know Your Customer and Anti-Money Laundering processes. There is more visibility across crypto blockchain networks than there is across traditional siloed financial systems that prevent visibility throughout the entire transaction process.
Regulatory acceptance of crypto will enable faster adoption of these valuable and transparent technologies for next-generation financial systems. The level of creativity shown by fintech entrepreneurs is growing exponentially; the recent success of DeFi is just the beginning.”
Emin Gün Sirer, CEO of AvaLabs, professor at Cornell University, co-director of IC3:
“Crypto will always have a base that says traditional regulators have no say in operations on these networks. This ethic is vital for continuing to build and offer technologies that keep individuals around the world connected to a financial system. As we’ve seen in some authoritarian regimes, access to the legacy financial system can hinge on abandoning your beliefs and conforming to state-approved messaging.
That said, service providers engaging with fiat will always have to answer regulators’ calls. The likeliest outcome is that there is a split in crypto between regulator-approved services and those that make business trade-offs in a commitment to the ideals of permissionless systems.”
Mati Greenspan, founder of Quantum Economics:
“Many crypto assets are exceptionally resistant to regulation by design. One of Bitcoin’s main reasons for being invented was to have a currency that is independent of governments and banks, so it makes sense that regulators are having such a tough time overseeing this particular market. There’s no doubt that over time, they’ll manage to gentrify mainstream usage, but there will always be loopholes and workarounds available, especially for the more technically savvy.”