Regulatory advances are a sign of the maturity of the cryptocurrency market
Within a couple of years, decentralized finance has bypassed the products and regulatory frameworks that took decades to put in place.
The fact that users can interact with financial products at the smart contract level and essentially create programmable money with respect to the products is empowering and disruptive.
Not unlike disrupters in other industries, DeFi operates outside the regulatory environment . This environment is designed to manage institutions that spend millions of dollars on compliance alone.
Traditional VC-supported platforms such as Uniswap have distributed resources to tens of thousands of people. All without considerations relating to Know Your Customer (KYC) and Anti-Money Laundering (AML). This unprecedented “airdrop” has no parallel in either the financial markets or any other sector.
The specter of over-regulation has raised its head
Regulators and law enforcement agencies have targeted anonymous cryptocurrency transactions, while FinCen regulations focus on “non-hosted” wallets.
The US Senate-approved Infrastructure Bill features a section that addresses cryptocurrencies and the operations surrounding them. Among the proposals there is a license fee for anyone who participates in a network. This includes activities such as staking out or running a node.
The new proposals in the bill add obstacles to the industry by favoring well-funded entities that can guarantee the license. Hence, encouraging centralization in a sector built around decentralization. Higher fees essentially block casual, non-profit participants from the cryptocurrency industry.
With ambiguous wording, his move to the House of Representatives could stifle progress in the cryptocurrency industry and prevent a better, decentralized future. If you want to enter the cryptocurrency industry, you can do so from the front door on the official Bitcoin Code website .
Californian exchange Coinbase has warned its investors that US regulations could undermine its ability to compete with DeFi.
"Economic freedom is a necessary, if not sufficient, condition for human progress," Coinbase CEO Brian Armstrong noted in a letter incorporated into a new prospectus filed with the US Securities and Exchange Commission (SEC).
DeFi is decentralized by design: regulating “the house” is not enough
Anyone can interact with products directly without a compliance intermediary. The only mechanism between a user and the contract that enables the DeFi feature is the blockchain with which the user's wallet interacts.
Although some DeFi bluechip entities are quite transparent, even more so than some CeFi entities, many projects have been implemented by anonymous founders. Therefore, there was no one to hold accountable for the failure or success (created value or lost value).
The DeFi space has evolved into a Dark Forest where code is the law and even the red carpet, for example when developers abandon a project and run away with participants' funds, they are part of the game.
During the previous 2017-2018 cryptocurrency bullish cycle, there was chaos. This in the sense that most of the players did not know what the future regulation would be like.
A team's focus has largely been removed from working on a project. Rather they cared about the legality, making sure they had no personal criminal responsibility for their actions.
However, even then, the focus was on the central entity that was issuing the tokens, making promises, and profiting from the sale. With DeFi, in some cases, there is no obviously responsible central counterparty.
The regulatory infrastructure will mature
An expanding pool of tools is being developed to ensure that the cryptocurrency space operates within a specific framework. This is not entirely different from the way classical financial systems operate.
The closer we get to a clear and solid picture, the closer we get to creating a more transparent space that will offer more value to retail attendees.
Complete clarity on every single aspect of cryptocurrency regulation, with what can and cannot be done, will standardize cryptocurrencies and make them safer and more accessible to all. As regulatory issues become clear, enterprise developers and entrepreneurs can innovate based on frameworks that are easier to understand.
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The article Regulatory advances are a sign of the maturity of the cryptocurrency market comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/i-progressi-normativi-sono-un-segno-della-maturita-del-mercato-delle-criptovalute/ on Fri, 22 Oct 2021 20:18:27 +0000.