Crypto

Crypto Regulation Is Like a Flimsy Umbrella in a Monsoon CryptoBlog

You know what they say, “when life gives you lemons, make lemonade”. But when it comes to protecting your crypto funds on centralized exchanges (CEX), the old adage should be “when life gives you regulations, make a self-custody wallet.” Self-custody is undoubtedly a better solution to protect the interests of crypto clients. Regulation alone is not enough.

The following opinion editorial was written by Joseph Collement, General Counsel at Bitcoin.com.

Don’t get me wrong, regulation is important. It’s like a flimsy umbrella on a sunny day – better than nothing, but not something you want to rely on during a monsoon. Just ask the folks at Gemini, who, despite being the “most regulated” CEX, still managed to lose all of their “Win” clients’ money. Talk about “earning” a bad reputation! Ouch.

Crypto regulation is like a flimsy umbrella in a monsoon

But let’s be real here, the crypto world is like the Wild West. And let’s be honest, the US government is like the sheriff who just came to town, trying to make sense of this new frontier. They’re like the dad at a teenage party, trying to figure out what’s going on, but eventually getting in the way.

Working more than 5 years full time in crypto as a lawyer, I would dare say that the problem with CEX is not the regulation (or lack thereof), it is the business model itself. When an entity takes control of customer funds, it has an incentive to trade and gamble with that money, like a stockbroker playing blackjack with your retirement savings. Meanwhile, customers are left with the bag (or in this case, the empty wallet) when things go wrong.

“Regulated” CEXs also include services such as trading, custody and market making. Unlike a traditional regulated exchange platform, many CEX users compete against the exchange itself on a trade, as opposed to another client of the exchange. This gives CEXes the ability to trade forward and against their clients, a well-known practice perpetrated by top-tier exchanges, even in the United States.

And let’s not forget piracy. To date, approximately $5 billion in user funds have been stolen in the past 3 years, with just under $3 billion in 2022 alone. But don’t worry, the DOJ is still here. to protect you. With their massive hits against well-known crypto criminal organizations like Bitzlato, they will make sure your funds are safe.

Complying with regulations costs CEX billions of dollars in revenue, and the cost is often passed on to the customer. CEXs spend more money on legal and compliance than on product development. This month, Coinbase invested $50 million in its compliance department under an agreement with NYDFS, but cut 20% of its workforce. Lawyers are blockers, not UX designers. And if you follow their advice blindly, you might end up with the good old pop-up cookie.

Seriously, self-custody is the way to go to protect your crypto funds. Honest business practices and non-custodial wallets are key to protecting the interests of investors and customers in the crypto world. Instead of relying solely on regulation, let’s move to a more decentralized model, where users have full control over their own funds and are not at the mercy of centralized entities. Only then can we truly ensure the safety and security of user funds in the crypto world.

Keywords in this story

business model, Centralized exchanges, Compliance, control, Crypto, crypto world, crypto-guard, custodial wallets, Clients, Decentralized, ethical business, protection of funds, Government, Piracy, investment, Investors, Joseph Collement, legal, non-custodial portfolios, Opinion piece, Editorial Notice, product development, Regulation, Regulations, regulatory climate, Reputation, Responsibility, returned, security, Security, self-guard, stockbroker, confidence, user controlled, far west

What are your thoughts on self-custody as a solution to protect crypto funds? Do you agree that this is a better alternative than relying solely on regulation, or do you think a different approach should be taken? Share your opinion in the comments below.

guest author

This is an opinion piece. The opinions expressed in this article are those of the author. Bitcoin.com does not endorse or support any views, opinions, or conclusions drawn in this article. Bitcoin.com is not responsible for the content, accuracy or quality of the opinion piece. Readers should exercise due diligence before taking any action related to the Content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information contained in this opinion piece. To contribute to our Op-ed section, send a suggestion to op-ed(at)bitcoin.com.

Image credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. This is not a direct offer or the solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.



#Crypto #Regulation #Flimsy #Umbrella #Monsoon #CryptoBlog #Crypto

Related Articles

Back to top button