By
Chimamanda U. Martha
April 23rd, 2024
During the Yahoo Finance All-Markets Summit that took place on Feb. 7 in New York City, a top U.S. financial regulator had stuck an upbeat tune about the practice of formal self-regulation within robust cryptocurrency ecosystem.
From the very begging of its story, the wider society had viewed cryptocurrency as the mains currency of the nefarious dark web markets that serves as a route to nefarious activities and therefore treated it with both distrust and derision. Times changes and nowadays cryptocurrency becomes truly mainstream for making huge strides towards the worldwide application of disruptive blockchain technology.
However, regulation was always a sticky point of all cryptocurrency discussion. Some purists praise cryptocurrencies for the ability to evade government regulation while most financial market are governed by the myriad rules nourishing red tape and intermediate expenses. But others feel regulation is inevitable, and say it’s in the industry’s interest to be proactive and accept—or even promote—sensible regulation.
That is given that innovation in technology always outruns regulations and it takes time for the financial system and market to adjust to the innovations and come up with solutions needed to control its members as well as protect them.
But it could take years for government to develop and pass a law stipulating which federal agency should rule digital ecosystem. That’s why some suggest to grant the crypto industry with an opportunity to establish its own regulatory structure and continue to expand horizons under its own regulatory scheme.
At the Yahoo Finance All-Markets Summit Brian Quintenz, a commissioner with the Commodity Futures Trading Commission, encouraged the crypto ecosystem to form a so-called self-regulatory organization, or SRO, similar to those that exist in other parts of the financial system.
As the successful example of such model, he mentioned the Financial Industry Regulatory Authority, or FINRA, which oversees more than 4,500 brokerage firms in the United States, setting licensing requirements, enforcing trading rules and settling disputes.
Speaking to interviewers at the Yahoo Finance event Brian Quintenz also said:
“I would like to use this opportunity right now to call on the investment community and the advocacy community around digital currencies to create some type of self-regulatory organization that can develop standards around cyber policies, data retention, record keeping, financial records obligations, insider trading, ethics, and codes of conduct. Self-regulation has a strong history in our markets.”
The investors and crypto enthusiasts seems to be cheered up by the following announcement as the market started to recover from the heavy correction adding nearly $100 billion valuations in the last 24-hour. Bitcoin as well has shown the signs of recovery started trading on positive momentum with 25% gain after it slipped close to $6000 levels.
Nevertheless, there are several assumptions that may not necessarily apply to this argument. For example, SROs aren’t free of government invasion. In essence, such groups have to enforce rules that regulators deem to be in the public’s interest, on matters such as consumer protection, ethics enforcement and professional requirements.
And plodding pace of self-regulatory, the crypto community should be aware that in case of failure, the government will be able to interfere and pass whatever restrictions it consider appropriate.