During the Bipartisan Policy Center panel held on Feb. 12, Commissioner Brian Quintenz from the United States Commodity and Futures Trading Commission (CFTC) suggested that crypto bodies should look at the aspect of forming a self-regulatory structure. He said;
…platforms come together to form some type of self-regulatory structure where they can discuss, agree to, implement, and hopefully examine or audit.
A self-regulatory body is potentially a very viable solution to the problem of regulatory clarity in the crypto arena. A body formed by the industry leaders themselves will be more appropriate for this space and approval from the Congress will help maintain a credible image of this world as it is the national legislative body of the U.S. He further added;
A self-regulatory organization is specifically chartered by Congress through the law,
Blockchain itself carries a huge potential of removing the requirement of regulatory oversight. Self-regulation in a decentralized autonomous organization (DAO), an organization controlled by shareholders and not by a central authority, will help remove the negative and fraudulent elements from it making sure that the credibility is maintained.
Self-regulating organization puts regulation on itself without intervention from external parties. Cryptos self-regulating themselves can prove to be the best thing for the industry as it might help form a body that will not only provide it enough space to innovate and grow, but will also help eliminate the illegal activities linked with it.
Regulations have remained largely missing from this space because the tech is very new and there isn’t much clarity under which asset class the cryptos fall from the regulatory point of view. The need for regulations in stems largely from the fact that there are a lot of illegal and fraudulent activities prevalent in this space. In the past, we have seen investors losing a lot of money owing to their investment in fake cryptos or ‘scam coins‘.
In order to protect the investors and establish a credible fabric of operation, the crypto world has to form a regulatory framework using which they can classify projects, making sure that certain cryptos are credible and the claims made by crypto project are real.
Dark web, an online marketplace for all kinds of illegal activities, is one of the primary markets where cryptos are used largely to make payments. Privacy-based tools like Tor, are often used to access it making tracking nearly impossible. With a self-regulated DAO, crypto projects can become accountable for any illegal operation.
A self-regulatory body can make sure every project arising in the cryptos space follows particular laws and regulations as defined by the body. The organization can also perform audits, keep checks on insider trading and manage issues related to custody, liquidity etc. The body can ensure this by auditing various crypto platforms over specified intervals.
Hester Peirce, commissioner at the United States Securities and Exchange Commission (SEC) was also present in the panel and said;
There are lots of markets that aren’t regulated, but we nevertheless build [derivative] products on top of them.
Unregulated markets are not controlled by the governments or any central authority. With regulations in place, projects will be forced to act in a certain way and fulfill certain legal requirements which might limit their creative potential and innovation might drop down in this space.
With governments not stepping in, there arises a need for overseeing this space for fraudulent activities and self-regulated DAO, with industry leaders as members, is the answer. Self-regulation also holds true to the essence of decentralization presented forward by this space. If not bent for governmental control, the crypto world will have to adopt a self-regulatory operating mechanism so that the image of this space becomes more positive.