Crypto regulation & innovation: Can they co-exist?
In the world of cryptocurrency, regulation, and innovation are often viewed as opposing forces. This is particularly true in the case of decentralized finance, or DeFi, which operates under a distinct set of rules from traditional financial systems. For instance, Bitcoin allows anyone to participate without the need for KYC, and many DeFi platforms offer financial services without geographical restrictions.
At a panel during the Consensus 2023 conference, a group of prominent crypto officials shared their views on the relationship between crypto regulations and innovation. They believe that instead of seeing regulation as an obstacle, crypto firms can use these tools to better serve the public through trust.
Chris Zuehlke, the Global Head of Cumberland DRW, pointed out that the progress made by the industry in its short existence shows that innovation and regulation do not have to be mutually exclusive. Despite several fallouts in 2022, including FTX, Terraform Labs, Three Arrows Capital, Voyager Digital, Celsius Network, and BlockFi, the industry has continued to grow.
Guy Hirsch, the North American Managing Director of Kraken, highlighted that the 2022 industry crash, although bad, can be a good reference point for the future. It brought to light the issue of trust using proof-of-reserves accounting, which is better than what traditional systems use for auditing.
Zuehlke also noted that the 2022 crash exposed the faulty foundation of the banking system in Q1 2023 when banks started collapsing. This gave rise to users seeking safety in Bitcoin as well as other digital assets.
Clients need protection
John Palmer, President of Cboe Digital, spoke about how adoption has increased despite challenges in the industry. He said that their conservative offering has received a boost in terms of patronage. Although he revealed that it was not attractive to users before now, it has turned out to be an option for investors looking for a safe place to store their assets.
Hirsch also stated that he believes that the industry needs to develop safe systems that users can trust with their assets, with the help of innovation and regulation.
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