- As regulators become more active in cyptocurrency markets, it's worth examining exactly what their role is.
- After all, cryptocurrencies like Bitcoin were born out of mistrust of centralized, government regulation and control, and were built specifically to resist their influence.
- Regulations can support a healthy crypto marketplace, not by controlling it but by focusing on KYC, anti money laundering, and transparency.
- Sign up to trade regulated, 100% insured crypto today.
By: Marko M. Hafez, President
A lot of people are skeptical about regulators coming for crypto. And I totally understand why. After all, the founding point of crypto was to get away from the traditional financial institutions that failed to protect us from the 2008 economic crisis.
And so we got a white paper by Satoshi Nakamoto that led to a decentralized network featuring the world’s most prolific digital asset: Bitcoin.
Bitcoin features many characteristics of a successful, long-lasting store of value and medium of exchange, including built-in scarcity, near-infinite portability, ease of transfer, and it’s just about impossible to confiscate or counterfeit.
Which is great!
Hooray! via GIPHY
So when it comes to government, the definition of centralized control, the idea of crypto regulation is almost laughable. How could they hope to control it? And moreover, why would we want them to?
Seeing as how I’m one of the co-founders of Blockstation, a tech company dedicated to helping traditional financial institutions get on the blockchain and start trading digital assets (cryptos and Security Token Offerings, or STOs / tokenized IPOs), I hope you’re not surprised that I’m in favor of regulations.
What might be surprising is that regulatory oversight doesn’t necessarily mean centralized control. And it can work to enhance the digital asset marketplace for everyone.
What regulation shouldn’t look like
In a previous blog, I argued that it was time for regulators to take a look at cryptos. And Facebook wasn’t exactly having it, if the comments thread was anything to go by.
The funny thing is, I tend to agree with what their arguments. The Bitcoin network works well, people can use it freely to transfer funds around the world, the hodlers can hodl away… there’s no real point in trying to control any of that. In fact, as long as we’re talking about things that regulation shouldn’t do, we can include:
controlling the blockchain
preventing on ramps and off ramps to the network
denying users access to the network
restricting payments made on the network
I think we can all agree on that. However, we have to recognize that the digital asset marketplace has risks that traditional financial markets don't.
For instance, when I invest in the stock market, I’m confident that my trades will be risk-free in many ways. The exchange likely won’t get hacked like Mt. Gox, and it probably won’t collapse overnight and take my money with it, like Quadriga. It won’t list and de-list assets on a whim, like Binance did with BSV. Publicly listed investment opportunities will include a high degree of transparency, unlike the explosion of sketchy Initial Coin Offerings (ICOs) in 2017. It will operate safely and predictably.
Where does that confidence come from? Regulations.
What regulation does look like
Earlier this year we went live with our crypto trading pilot for Bitcoin and Ethereum - and very shortly the first STOs / tokenized IPOs - in a fully regulated marketplace, the Jamaica Stock Exchange. The sky hasn’t fallen.
>>>>>>Sign up to start trading today<<<<<<
So what does reasonable regulation of cryptos look like? In our view:
Anti-Money Laundering tools
Operating standards for exchanges, brokers, etc, to increase security and reduce risk for investors
Transparent investment opportunities in STOs / tokenized IPOs, including a full prospectus for investor review
Consistent processes to guide the listing and de-listing of assets
Insurance coverage for digital assets in the event of a security breach
Looks pretty reasonable to me.
Regulations are inevitable, but they don’t have to be onerous
Evolving from their Wild West beginnings to mature, regulated systems is simply what happens with any new innovation that hits the mainstream.
Cars gave way to traffic lights and licensing, airplanes gave way to incredibly rigorous safety standards (give or take a 787 Max), and now we can add the digital asset marketplace to the list.
Even without traditional regulators like the Securities and Exchange Commission, the crypto industry already has several initiatives underway to self-regulate - evidence that one way or another, the civilization is coming to tame the Wild West.
Welcome to the regulation party, cryptos! via GIPHY
In the digital asset space, regulations should be there to ensure that the institutions and systems handling your transactions operate in a way that makes the market as safe as possible - not controlling the currency itself.
It’s what we believe we’ve achieved in Jamaica, and what we’re working towards with every other exchange we engage with.
What do you think?
Do government regulations have a place in the crypto world? Are we off our rockers? Let us know on social media using the hashtag #blockstation.
And if you like the idea of trading in a regulated environment, we’ve got you covered.