The question of whether self-regulation will help solve some of the cryptocurrency industry’s problems was on full display Monday during CoinDesk’s Consensus 2018 conference.
Part of the problem, according to panelist Gary DeWaal, a legal expert who focuses on financial services, is that existing rules as they relate to the tech are “an absolute mess.” And this situation, he contended, isn’t going away anytime soon.
“The CFTC budget has got cut this year. Even if it wants to regulate cryptocurrencies, it may not have enough resources from Congress to do so.”
DeWaal was seemingly commenting on an opening remark made in an earlier talk by Brian Quintenz, a commissioner from the U.S. Commodity and Futures Trading Commission (CFTC). During remarks on Monday, Quintenz said that any decision on whether ethereum’s ether should be regulated as a currency – a hot topic in recent weeks – “needs to be made carefully and coordinated.”
“The last thing we want to see is regulators take different views,” Quintenz said.
In this context, DeWaal said that self-regulatory organizations (SROs) can play a role in helping regulators test the waters ahead of clearer regulatory frameworks.
“One critical role of SROs … is in elevating the reputation of regulation, as it will set a standard that will hopefully be adopted by regulators in the future,” he said.
Echoing that point, Yuzo Kano, the chief executive officer of the Japanese exchange bitFlyer, said that efforts taken by Japanese cryptocurrency SROs had ultimately paved the way to the formal roll-out of a financial registration law launched by the country’s Financial Services Agency (FSA) in 2017.
“We initiated an SRO back in 2014 … to impose the know-your-customer (KYC) rule for exchanges. Some operators did want to take part, but some didn’t. What we did was to convince these operators to include KYC all together to protect the market,” Kano said.
Indeed, following a notable hack in January that saw some $530 million-worth of NEM tokens from the Japanese exchange Coincheck, crypto trading platforms in the country have again formed an SRO that works closely with the FSA to help bring about the secure and stable growth of the market.
On the other hand, regulators in other countries are moving more quickly in developing their cryptocurrency and blockchain rules.
Albert Isola from the government of Gibraltar said authorities there are using a multi-pronged approach: “businesses have to be quality players; there have to be regulations; and their management has to be inside Gibraltar.”
The same solution may not be applicable everywhere, however – DeWaal argued he “absolutely opposed to the idea to copycat regulations from jurisdiction to jurisdiction.”
“What we need is high-level principle of conduct to allow individual jurisdictions to keep their local initiative adapted to their local environment and existing legal frameworks.”