Cryptocurrency has been around for well over 10 years now, but only in the last few years has the subject of regulation become increasingly discussed. As the market capitalization for cryptocurrency continues to keep growing higher, more governments and banks are taking note. Traditionally, the crypto space has been referred to as sort of a “wild west,” but frankly those days are ending. If decentralized assets are going to truly have a place on the global stage, then they need to be regulated. However, perhaps calling on governments to enforce the rules isn’t the best idea for this industry. Maybe the key to effective oversight comes from within the very companies currently innovating this digital revolution. What regulations are enforced today really depends on where you look. Some jurisdictions, such as China, have come out fairly severely against any form of cryptocurrency that isn’t made by the state. Then there are places like the EU and the United States, which both are working to enforce fairly comprehensive Know Your Customer and Anti-Money Laundering standards on exchanges in their respective parts of the world. It is plausible that even more elaborate rules are likely going to be rolled out as the overall adoption and market cap of crypto continue to grow. Exactly how strict the rules around decentralized assets really need to be, is definitely a point for debate, and traditionally many cryptocurrency purists have been fairly opposed to any sort of comprehensive regulation. The early adopters are largely hostile towards the legacy financial system, but frankly, it is exactly this financial system that Bitcoin and its kind need to find a way to integrate into. If major institutional players are going to get involved, then cryptocurrency businesses such as exchanges need to take steps to show that they are willing to act accordingly. Realistically, the best way to do this is through self-regulation. Self Regulating Organizations (SROs) aren’t actually new to crypto either. There’s already a variety, such as the US’s Crypto Ratings Council (CRC) or the United Kingdom’s CryptoUK. These organizations are generally collaborations of various prominent crypto businesses who are seeking to show that they are committed to regulation by overseeing it themselves. This is also an attempt for community members to have meaningful control of how regulations are enforced, instead of merely waiting for it to be imposed upon them by a government. By handling it themselves, they can enact guidelines that are flexible enough to allow for proper development and growth in the sector but are still based upon the regulations coming from the legacy system. What makes this especially important is the fact that cryptocurrency has nuances that were not possible with any previous forms of currency. For one, blockchain transactions are basically irreversible. There’s some caveat’s to that depending on the chain, but it is one of the cornerstones of most of the assets available. Blockchains are also, usually, transparent. Everything that has ever happened on them is available for anyone to see. Neither of these characteristics applies to cash or even credit transactions. Current governmental regulators are struggling to catch up and wrap their heads around the implications, but SROs run by crypto exchanges understand them quite well. Actual industry insiders are realistically the best sources for deciding how to link the realities of decentralized assets with the rules that govern financial transactions. If everyone simply waits for the government to act, we will likely be waiting a while and get rules that are crude and unrealistic. When properly managed, SROs should ultimately have the effect of making cryptocurrency products and platforms look notably more attractive to institutional investors. It can give them the peace of mind that the exchange they choose to operate with isn’t going to be suddenly investigated or shut down. In light of some of the issues that have come up over the years, with both platforms and projects, it’s easy to see why professionals need to see a higher degree of accountability. If it can be achieved, then it should make cryptocurrency a much more embraced and trusted asset, and allow it to “grow up” into a part of the global financial system. Ultimately, despite what some crypto fans might feel, regulation is coming. It’s basically already here, just not uniformly enforced or understood. If the industry is going to both grow in a healthy way as well as get taken seriously, then SROs are probably the smartest path. This is clearly becoming increasingly obvious to many […]
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