Cointelegraph By Candace Kelly
There is often a perceived tension between regulation and innovation. A pervasive narrative has emerged that these two important parts of our society are at odds with each other. In reality, it’s when these two come together as partners that we can effect change and transform our world for the better.
Nowhere is this more true than in the blockchain industry.
Over the last few months, we’ve seen seemingly reactionary regulators in different parts of the world try to formulate new rules and guidance in silos, without sufficient input from the key stakeholders most knowledgeable about the technology — the innovators themselves.
Related: Stablecoins present new dilemmas for regulators as mass adoption looms
We saw this in the United States at the end of 2020 when the Financial Crimes Enforcement Network (FinCEN) pushed out a rule proposal that would significantly impact the digital currency landscape. Initially, they only allowed a two-week comment period over the end-of-year holidays. Ultimately, after an outpouring of feedback from stakeholders, FinCEN expanded that period. By all accounts, it is now engaging in a meaningful dialogue with the industry before moving forward with any further rulemaking. However, since then, draft guidance from the Financial Action Task Force has taken FinCEN’s place, looking to enforce the “old way” without seeking input from the private sector.
We saw this again in February when the Central Bank of Nigeria (CBN) issued a circular that sowed confusion about how they viewed digital currencies. It paused the operations of many promising financial technology businesses leveraging blockchain that were unsure how to proceed. However, after stakeholders inside and outside the industry — including other regulatory bodies in Nigeria — voiced concerns, CBN is now set to collaborate with the blockchain industry. They will conduct research to find ways to develop regulations that balance concerns they and others may have, while still allowing the value of blockchain to benefit the region.
Related: More harm than good? Nigerian crypto users in disbelief over CBN ban
Most recently, Turkey announced stricter rules on cryptocurrency in April, only to quickly clarify a softer approach after strong reactions from the industry and the country’s growing user base.
Related: Crypto payments banned in Turkey — Is this just the beginning?
Innovations empower regulators
At first blush, innovators and regulators may seem like strange bedfellows. Regulatory bodies have a tremendous duty to protect consumers and deter financial crimes, all while supporting — not squelching — economic opportunity and financial inclusion. Perhaps contrary to popular belief, these are values that innovators in blockchain share with regulators.
The genesis of this technology in many countries, and for many entrepreneurs and innovators, is to provide consumers with greater levels of access and protection. Blockchain can further these goals by offering low-cost, efficient payment capabilities and empowering regulators with greater consumer protection tools.
First, an immutable, public ledger becomes a new tool for transparency and accountability to deter and catch financial criminals. For example, forensic analysis firms like Elliptic have built tools that can identify patterns indicative of illicit activity based on publicly available ledger information. Unlike the traditional banking system, a public ledger allows investigators to see the movement of funds and identify suspicious activity before — or as a method of — identifying criminal activity.
Second, blockchain networks can have compliance functionality built in at the protocol level. For instance, on the Stellar network — an open-source, public blockchain — digital asset issuers can control who owns their assets. Recognizing a need for the ability to recall value from a past transaction when fraud, theft or regulatory action occurs — similar to what’s called a “clawback” in traditional finance — developers for the Stellar network are working on features to enable this functionality. This work underscores that it is possible to leverage the power of decentralization while also providing compelling features from centralized networks that facilitate compliance.
Lastly, there is a whole ecosystem of businesses creating compliance tools that better assess and analyze risk. So not only do companies have the tools they need to comply with existing regulations, but there are innovators ready to adapt those tools as needed. Blockchain technology can be, and is, used in a compliant fashion today. It employs the traditional know your customer and anti-money laundering practices used by regulated financial institutions and the enhanced transaction tracing capabilities afforded by a public ledger. These technological developments open the door to more efficient risk assessments, lowering the barriers to financial inclusion. That’s a testament to how regulation and innovation, when taken in tandem, can change the world for the better.
Dialogue is the answer
What’s unfolded recently in the regulatory sphere reinforces the importance of an open, collaborative dialogue between stakeholders — public and private — to determine the best ways to regulate blockchain and digital currency. Attempting to create regulatory frameworks behind closed doors or as knee-jerk reactions to perceived risks without regard to potential benefits isn’t a productive way to approach innovation.
Related: The need for a dialogue between crypto businesses and regulators
To do this right, we need to be working together. Blockchain innovators need a seat at the table to help educate regulators about what this technology is (and isn’t). We want to work together with regulators to shape the guidelines around this technology, addressing their concerns while allowing for innovation in the critical quest to expand access to financial markets and economic opportunity. Creating the right policy and regulatory frameworks for blockchain technology, if done in partnership, can finally put an end to the misconception that regulation and innovation are at odds. We look forward to the role we can play in proving the value of this partnership.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Candace Kelly is the general counsel and leads legal, policy, and government relations at the Stellar Development Foundation, a non-profit organization that supports the development and growth of Stellar, an open-source network that connects the world’s financial infrastructure. Candace started her professional career with the United States Department of Justice where, over the course of 17 years, she held positions as a legal and policy advisor in leadership offices in Washington D.C. and as a prosecutor in the Northern District of California. She holds a Bachelor of Arts in East Asian Studies from Williams College and a J.D. from the University of California, Hastings College of the Law.
“Bitcoin maximalists? They can’t stop innovation,” says Mati Greenspan
Cointelegraph By Marco Castrovilli
In an exclusive interview with Cointelegraph during Bitcoin 2021 in Miami, Greenspan criticized a segment of Bitcoin (BTC) maximalists for being “small-minded and insecure,” pointing out that they don’t have control over the main cryptocurrency.
“They cannot stop any kind of innovation from happening. So let them yap, it doesn’t bother me,” said Mati Greenspan, founder and CEO of Quantum Economics, about Bitcoin maximalists.
Greenspan‘s statements came a few days after a number of Bitcoin hardliners attacked him on Twitter for calling the Bitcoin conference in Miami “a crypto conference.”
Greenspan’s inclusive view on crypto is also reflected in his diversified investment portfolio. When asked about it, Greenspan pointed out that Dogecoin (DOGE) is his top holding on eToro. “Why not?” he said. “It’s funny!”
Check out the full interview on our YouTube channel, and don’t forget to subscribe!
Over 2 million adults in UK now hold crypto, FCA survey finds
Cointelegraph By Helen Partz
A new study by the United Kingdom’s Financial Conduct Authority has indicated a significant increase in cryptocurrency ownership in the country.
On Thursday, the FCA published the results of a consumer survey which found that 2.3 million adults in the U.K. now hold crypto assets, up from 1.9 million last year. Alongside the increasing number of crypto investors, the study also identified a surge in ownership volumes, with median holdings rising to 300 British pounds ($420) from 260 pounds ($370) in 2020.
The rising popularity of holding cryptocurrency comes in line with an uptick in the awareness level as 78% of adults said they have heard of crypto, up from 73% last year.
Despite the rising awareness and ownership of crypto, the FCA study has flagged a notable decline in understanding of cryptocurrencies, suggesting that some people who have heard of crypto may not fully understand it.
According to the report, only 71% of respondents correctly identified the definition of cryptocurrency from a list of statements, down 4% from 2020. “This suggests there may be a risk of consumers engaging with cryptocurrency without a clear understanding of it,” the FCA noted.
Related: Crypto and ‘meme stocks’ shunned by 90% of UK financial advisers
Sheldon Mills, the FCA’s executive director of consumers and competition, said that some U.K. investors have benefitted from the bull market this year. “However it is important for customers to understand that because these products are largely unregulated that if something goes wrong they are unlikely to have access to the FSCS or the Financial Ombudsman Service,” he added.
The FCA study also said that U.K. consumers significantly favor Bitcoin (BTC) over other cryptocurrencies, with 82% of respondents recognizing BTC. Among those who recognized at least one cryptocurrency, 70% recognized only Bitcoin, up 15% from 2020, the study said. “It seems likely many adults who have now heard of cryptocurrency are only acquainted with Bitcoin,” the FCA stated.
SEC opens to comments on whether to approve VanEck Bitcoin ETF
Cointelegraph By Turner Wright
The U.S. Securities and Exchange Commission has issued an order allowing the public to comment on the proposed rule change surrounding the Bitcoin exchange-traded fund from asset manager VanEck.
According to a Wednesday filing from the SEC, the regulatory body has not yet reached a decision on whether to approve or disapprove of VanEck’s Bitcoin exchange-traded fund, or ETF, but “seeks and encourages interested persons to provide comments” on the proposal. Specifically, the commission is asking the public to consider whether they believe the Bitcoin ETF would be susceptible to manipulation and designed to prevent fraudulent and manipulative acts and practices.
The SEC also asked people to weigh in on “the suitability of Bitcoin as an underlying asset for an exchange-traded product,” and the liquidity and transparency of the Bitcoin (BTC) market. Existing rules require that national securities exchanges are aimed to “protect investors and the public interest.”
Anyone interested in commenting on the proposed Bitcoin ETF will have until 21 days after the order is published in the Federal Register, and 35 days after publication in the same register for rebuttals. Members of public can submit comments through the SEC website, via email, or snail mail.
Related: SEC pushes decision on VanEck Bitcoin ETF until June
VanEck submitted the paperwork to apply for a Bitcoin ETF with the SEC in March following the asset manager withdrawing a similar application it had filed in January in partnership with blockchain startup SolidX. The commission has already extended the deliberation window once, from May 3 to June 17.
The SEC has the ability to extend the deadline in 45-, 45-, 90- and 60-day increments — up to 240 days — before delivering a final decision. However, under Section 19(b)(2)(B) of the Securities Exchange Act of 1934, the commission also has the right “to determine whether the proposed rule change should be disapproved” prior to any deadline, as is the case in the request for public comment.
No Bitcoin ETF has been approved by regulators in the United States. Given the SEC’s continued delays in the case of VanEck’s, Valkyrie Digital Assets’ and Fidelity Investments’ proposed BTC exchange-traded funds, many do not expect an approval soon. However, Canadian officials have given the green light for many crypto ETFs this year, including offerings from investment fund manager 3iQ, Purpose Investments, Evolve Funds Group and CI Global Asset Management.
DeFi3 days ago
Tim Draper Says Bitcoin to Hit $250K in 2022
Ethereum2 days ago
Shiba Inu and Chiliz jump 33% and 26% on Coinbase Pro listings
Bitcoin2 days ago
New Bitcoin bull market hodlers are refusing to sell at $40K, data suggests
Bitcoin3 days ago
Within five years, US hedge funds expect to hold 10.6% of assets in crypto
Blockchain3 days ago
‘Tiger King’ star and convicted animal abuser Joe Exotic to launch NFT from prison
Blockchain2 days ago
New DAO launches after $230M funding round including Peter Thiel, Alan Howard
Bitcoin3 days ago
Bitcoin price hits $41K, then rejects after sellers defend the 200-MA
Regulations3 days ago
Democratic lawmakers have formed group to address regulatory concerns around crypto