In 2021, the total value of the crypto market exceeded $1 trillion for the first time. However, until now, there is no global standard in terms of regulations that guides the market. Various regions are coming up with different rules to regulate the market and protect users.
This has negatively affected the way crypto products are perceived globally. Regulation was one of the major subjects of discussions at the NEARCON2022 event which held in Lisbon, Portugal.
Sheila Warren, CEO of the Crypto Council for Innovation, spoke about why regulations and policies are important in the industry. According to her, “regulation and policy are critical ways if we are serious about changing to a more user-centric system both financially and technically”.
In the traditional system, she explained, some regulations limit people from taking part in certain kinds of investment. If a person is not an accredited investor, they are not permitted to participate.
However, Sheila said, the absence of regulatory systems can hinder everyday users from participating in crypto investment opportunities. The risk is high and there are no clearly stated safety systems to protect users. Eelco Fiole, of Alpha Governance Partners, believes that the blockchain industry is in what he called “pre-regulation phase“.
In countries like Singapore and the US, Sheila continued, the regulatory framework is controlled differently. While the former has a central body being developed to oversee crypto-related activities, the latter has multiple bodies trying to regulate crypto with no clear boundaries.
Classification of assets
Sheila further narrated that one of the greatest challenges faced in the regulation of crypto assets is the classification of these assets. No one knows what should be under securities, commodities, unicorn and more as well as who should regulate each, she quipped.
To make the crypto market safer, Sheila shared that engaging the government on matters around regulations and hiring a good lawyer while building projects is important. It will help separate the wheat from the tares.
Eelco of Alpha Governance Partners also advised developers to integrate basic regulatory steps like KYC or AML. He believes it will help them be ready to absorb regulations when they come from government agencies.
Lastly, Navroop Sahdev, a digital economist, said that “the Web3 community should not wait for the government to bring in regulations”. Thus, the community should take that responsibility immediately.