After years of quiet progress, crypto is finally nearing mainstream adoption. No longer the exclusive realm of nerdy crypto enthusiasts, Bitcoin has become a household name and some of its competitors — namely Ethereum and Ripple — are nearly there. Along the way there have been hacks, exchange collapses, and myriad scams. While they were once considered the cost of doing crypto business, crypto’s growth in popularity has drawn the attention of regulators worldwide who don’t consider the occasional exchange collapse acceptable.
Governments worldwide are already considering crypto regulation. In the UK, the Financial Conduct Authority (FCA), the Treasury of the UK, and the Bank of England (BoE) will publish a set of guidelines on cryptocurrencies this year. In China, the People’s Bank of China’s has just released a report that recommends a stronger regulatory framework for cryptocurrencies. The US Securities Exchange Commission (SEC) considers all tokens and cryptocurrencies to be securities.
Could there be a better way? Government regulatory agencies are not known for being flexible or rapidly evolving, nor do they have a reputation for quickly adapting to new technology. A better solution might involve the crypto world establishing its own self regulatory agencies to obviate the need for heavier-handed and perhaps less technologically sound government regulation.
Self regulation is already common in the financial world: in the US, the National Futures Association (NFA) and the Financial Industry Regulatory Authority (FINRA) both play a large role in regulating their respective markets. In Asia, the Securities Association of China (SAC) and the Japan
Securities Dealers Association perform similar functions.
A cryptocurrency regulatory body with the membership of industry leaders would have a wealth of benefits. As an organization of crypto leaders, it could provide informed oversight on the crypto markets. It could make and change rules and regulations more nimbly than any government regulator. This would be particularly useful in the crypto world, where tokens, exchanges, and blockchain tech are evolving in leaps and bounds. This explosive growth will doubtless create new opportunities and solutions, but also new threats. The recent flood of ICOs, not a few of which are more scam than startup, would benefit from the oversight of a self regulatory agency.
Some markets have already seen the formation of self regulating organizations. In the UK, seven of the leading crypto firms created CryptoUK,an industry organization that includes Coinbase, eToro and CEX.IO. Founded in February of this year, their goal is to self-regulate the UK crypto industry. They hope to work with UK national regulators to establish a code of conduct, though they do not address the ICO issue.
In Japan, after the $530 million Coincheck heist, Japan’s 16 government-registered cryptocurrency exchanges created the Japan Cryptocurrency Exchange Association. Their purpose is to create standards and rules for exchanges that are not yet registered with the Financial Services Agency (FSA), a government regulator which has been regulating crypto in Japan since 2016.
There may be disadvantages to self regulation as well: there could be a conflict of interest, perhaps a tendency for industry leaders to write rules that benefit themselves at the expense of smaller competitors. Some crypto purists might argue that crypto is designed to regulate itself. These are fair points, but there is no option to remain unregulated. Most governments have been publicly considering regulating cryptocurrencies for months or years. Their agencies will eventually have oversight of the crypto markets.
The challenge is that cryptocurrencies are something world has never seen before, so naturally no one really knows how to regulate it. The unregulated cryptosphere is susceptible to fraud and scams. Legislation and regulation will make it much easier for cryptocurrencies to become globally accepted.
We at Saifu are doing our best to overcome the barriers of mass crypto adoption. Saifu is a regulated financial institution, because we hold a license from the Czech National Bank, we are required to be compliant with rigorous rules and procedures. We deliver a service our customers can truly trust.
The Saifu team is also closely monitoring the drafting of the upcoming 5AMLD and the entire regulatory framework. We apply same approach to all currencies including crypto, so once regulation is in place, we will be ready for it.