Why crypto leaders need to cooperate more with regulators
The digital asset industry is growing rapidly, driven by the emergence of a variety of use cases, namely cryptocurrencies, NFTs, the metaverse, decentralized finance (DeFi), stablecoins, security tokens, central bank digital currencies (CBDCs) and other related technologies. With this growth comes the need for both regulation and collaboration to promote sustainable adoption and long-term growth.
Digital assets can be a complex concept for beginners and regular customers. This leaves the average asset holder susceptible to fraud and fraudulent activities. Last year was one of the most turbulent years in cryptocurrency history with high-profile events such as the collapse of algorithmic stablecoin Terra USD and its sister coin Luna, the insolvency of offshore exchange giant FTX and several major lending platforms – including Celsius, Three Arrows Capital and Voyager – declaring bankruptcy. At the same time, innovation in the sector is accelerating at breakneck speed and showing promising progress on DeFi, CBDC and NFT.
Regulations not only serve to protect holders of digital assets, but also provide legal certainty to the mass market. As a consequence, regulations may encourage the average customer to enter the market. Moreover, regulations that provide a clear legal framework for institutional investment can encourage more institutions to invest in cryptocurrencies, which can help drive adoption.
Collaboration also has an important role to play in making digital assets mainstream. Cooperation between industry players and regulators can help educate consumers and investors about cryptocurrencies and their potential benefits and risks. Collaboration can also help promote standardization and best practices in the cryptocurrency industry. This can help increase transparency, reduce confusion and improve the overall user experience, which can encourage more individuals to use cryptocurrencies.
To make digital assets more sustainable and ensure widespread use, it is important to find a balance between regulations and cooperation. A collaborative approach involving both public and private sector stakeholders is essential to ensure a digital asset framework that is secure, transparent and compliant with existing laws. At the same time, consultations with industry stakeholders will enable a formidable framework to exploit the full potential of this powerful new technology. Well-designed regulations are the cornerstones of wider use, with standardized expectations from stakeholders leading to building trust.
In order to monitor the enormous success of digital assets and the possibility of it challenging the current financial models, governments around the world have begun to draft progressive regulations to protect investors and build a safe environment for the digital asset industry. With the regulations in place, we will see better coordination between law enforcement and crypto businesses to combat anti-money laundering and counter-terrorism financing, as well as greater standardization in security and consumer protection protocols. This will also pave the way to encourage investor education and exclude misleading investment advice, resulting in improved compliance and consumer protection in the digital asset ecosystem.
With the implementation of these regulations, governments will be able to prevent money laundering, combat the financing of terrorism, tighten loose security systems set up by crypto-native organizations, limit misleading crypto ads, ensure full disclosure and guide investors on board. These regulations are essential to ensure that digital assets are used in a responsible and compliant manner.
Numerous associations such as Blockchain Australia, Asosiasi Blockchain Indonesia and CryptoUK have worked explicitly to improve the public environment for crypto networks. Collaboration, while maintaining the necessary regulatory oversight, can help create an environment where industry can thrive. It also ensures that industry players can work together to identify and address potential risks, while regulators can provide guidance and oversight to ensure industry complies with necessary laws and regulations.
In addition to this, a mix of collaboration and regulation can increase the level of innovation in the space, so that it can usher in the full potential of this new asset class. Only through interconnection can we set the right protocols, and bring out the potential of how the underlying technology of blockchain, through digital assets, can change the way we manage our financial applications in the future. Cooperation between regulators and the industry is also important to create financial stability and combat risk. Through cooperation, a system can be established that balances innovation and growth.
Over the past few years, the industry has grown at a pace too fast to sustain. Growth was spurred by speculative interest, and not by actual development and innovation. Ultimately, a balanced mix of both regulation and cooperation will pave the way for the imminent future of digital assets and will define the security and efficiency outlook.
Regulations will provide the necessary protection for investors, while cooperation will create an environment where innovation can thrive. This mix will also fix the lack of risk management and compliance required to push forward increased participation from industry leaders and institutional players. The entire digital asset ecosystem will receive the much-needed fillip as collaboration and regulation go hand in hand, creating a precise path to leverage digital assets that serves everyone equally and empowers a new era of economic upliftment.
