Op-ed: How cryptocurrency can be free from corruption to make our world more democratic Contributor Op-Ed
Op-ed: How cryptocurrency can be free from corruption to make our world more democratic
The whole crypto world is driven by one word – freedom.
5 min read
Updated: Feb. 21, 2022 at 6:38 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Idealists believe humans can thrive without rules, but history tells us a different story. All successful societies impose structure on their citizens. Regulations are the building blocks of a well-ordered civilization, and they are critical to growth and development.
Through the course of history, we have seen that every evolving industry goes through a process ending to a greater or lesser degree with regulation.
Now, we are at a critical moment in the development of cryptocurrency. In order to ensure this groundbreaking technology can flourish, we need to free it from the dark side – the selfish forces using it to further their short-term need.
By this, I mean corrupt entities who wish to profit at the expense of others, money-launderers, and criminals.
We did not develop blockchain and crypto to put money in these pockets. We developed this next-generation technology as a liberating currency free from interference or self-interest.
It should be the path to liberating financial democracy, allowing everyone to participate in financial markets, not a haven for the corrupt. So the true idealists who rightly dreamt of a brave new world free from bank and state control will join with me in saying: now is the time to dredge the pond. It is a minority who use crypto for corrupt purposes, and yet – if we do nothing – their actions seek to tarnish the entire sector.
We must not view regulation as a negative – the right regulation enhances freedom and provides a framework for growth. Look at employment rights in emerging markets – regulation is critical to make the system work and protect individuals at exploitation risk. Here, regulation acts to support economic growth and freedom.
It is true to say that the most regulated industries are those that have the potential to cause the most harm. From pharmaceuticals to education, regulation ensures the same high standards are upheld by different institutions, to engender trust across the sector.
Food supply and hygiene are also heavily regulated, to safeguard a basic human need. In these industries and countless more, regulation has had positive benefits.
And let us be in no doubt, unregulated crypto can cause harm – the naive can be duped, even the wise can be hacked.
The whole crypto world is driven by one word – freedom. The simple fact that governments cannot access your wallet is already a huge win when it comes to freedom. But true freedom comes with rules.
We must put in place sophisticated regulations. Ensuring the sector is transparent, clear, and law-abiding is the key to retaining freedom. We should make sure that crypto is not a safe harbor for money laundering, criminal funds, or other nefarious activities.
So for my part, I passionately believe that crypto needs to be regulated. Furthermore, I think that the industry should actively lead the way – and focus on the positive impact regulation can bring.
Why? Because up to now, crypto has been the new Wild West – and if we want to change that and become part of the reputable financial framework, we have to accept that regulation is a necessary part of growing up.
Binance ignored regulation for too long with the result that it is now banned in many economies while allegations of tax fraud and money laundering are investigated.
Regulation will come anyway as our industry grows – so let us welcome it. There are those who would curb the industry altogether, banning financial institutions from dealing in cryptocurrency and we play into their hands if we do not come to the table and behave responsibly.
Take the case of tech companies. The fact that tech companies were harvesting data without any limits led to GDPR and similar laws.
Now, they are subject to an imposed framework and huge fines if they fail to abide by regulations. If tech companies had worked more responsibly with customers’ data and regulators, the restraints imposed could have been much lighter.
We know that, left alone, regulators err on the side of removing freedom. Working with regulators is the key to preserving freedom. Freedom is an effective choice. Previously, companies could choose what to do with data. Now, that choice has been removed.
Dialogue with regulators is the way to preserve this choice. If we want our industry to progress, there is only one way forward – we should help governments to shape regulation. Naturally, measures to prevent corruption will form a key plank of this regulation.
We, industry pioneers, should work with them to act as custodians of the system, preventing its misuse and protecting consumers. This will benefit all, as regulation without the help of practitioners can lead to mistakes and misjudgments, unintended consequences, and risk.
We are hardly the first industry that started with no rules. Twenty years ago, only a handful of countries mentioned the word ‘internet’ in legislation. Today most legal systems have adapted to the new connected world. The same will happen with crypto, whether we want it or not. The key is to lead this process and make it good. Thus, dialogue, discussion, and debate powered by informed opinion are the only way to move forward.
This will involve liaising with policy-makers in the UK, EU, and the US, along with governments in other parts of the world where mining and crypto processing is currently based.
So what would good regulation look like? Cryptocurrencies are at present largely unregulated in the EU. The European Commission’s proposed Regulation on Markets in Crypto Assets (MiCA) is before the European Parliament. It will form part of the EU’s Digital Finance Strategy and is likely to impact significantly the operation of the crypto market in the EU.
It is useful for experts to help shape this regulation. The World Economic Forum Global Future Council on Cryptocurrencies is producing interesting work in this field, such as its paper Navigating Cryptocurrency Regulation: An Industry Perspective on the Insight and Tools Needed to Shape Balanced Crypto Regulation.
The Kalifa Review of UK FinTech rightly recognizes that FinTech is not a niche or sub-sector, but a permanent technological revolution that is changing the way finance works forever. It also frames development in this industry around trust, and its necessary foundation in leadership, regulation, and the rule of law.
Green principles addressing the carbon footprint of crypto are likely to be included in future regulation. This is quite right – we must ensure cleaner technology and cleaner energy sources are used to make next-generation finance sustainable. Critically, we do not need to see regulation as inherently threatening.
Because crypto is a disruptive technology, the individuals involved tend to be out-of-the-box thinkers, who do not like to be confined by rules.
Others are protectionist, fearing that mainstream attention will erode their profits. Human advance is not driven by fear, however, it stops us from making the most of our potential.
To be truly clever, we must rise above this natural reaction, and embrace the positives regulation brings – rule makers are not necessarily against financial development.
Both at the EU and national level, European regulators have expressed support for blockchain technology and its potential for digital transformation in the finance sector. This regulation aims to create an investment- and growth-oriented regulatory framework and to prevent harm. And here is where governments and crypto pioneers agree, growth can only benefit us all.
We can expect regulation to promote consumer and investor protection, market integrity, and financial stability, leading to increased legitimization of the sector. This synergy will attract new investors and allow crypto to expand into the mainstream.
In time, this will lead to greater legitimacy of the sector. In turn, the best operators will rise to the top and become more profitable, with shady competitors disappearing from the market.
Regulation is the next frontier for crypto – it is a mark of our industry’s success. We must not fear it, but instead, embrace regulation so that our sector becomes the best that it can be.
This is the way to erase corruption and develop a truly inclusive and beneficial financial democracy for all.
