We could use crypto regulation after FTX – but let’s start with the basics
As a crypto CEO, I know how often our industry is misunderstood and criticized. Sometimes criticism is deserved because we haven’t always done our part to shine a light on utility and use cases fueling positive change. But other times it’s based on the assumption that everyone in this industry is the same, which just isn’t true.
Recently, skepticism has reached new heights with the FTX epic crash, one of the largest crypto exchanges in the world – and perhaps the greatest example ever of the need for regulatory oversight. Given FTX’s positioning, it was an incredible leap to see them facing insolvency. When the news broke, we saw a massive downturn in the digital asset market. Consumers had to decide whether FTX – or any entity in our space – is a safe manager of their funds.
Many may wonder if there is a future for crypto, and I understand the frustration with the hole the industry has created. But there is a future for blockchain and crypto, and we cannot lose sight of the usefulness and value of this technology for doing meaningful things – from optimizing supply chains around the world to creating equitable access to global financial system. The real question is how we build the future we want that inspired the development of this technology in the first place. And that response relies heavily on standards (both technical and industry-wide) and rules, some of which must come from our officials.
Related: From the NY Times to WaPo, the media loves Bankman-Fried
The United States federal government is well positioned to lead. To do this, it must provide clarity and guidance to industry by implementing thoughtful and principled regulation. This is the type of leadership that will help shape the “good” future, and with a newly elected Congress, it is a charge I urge them to shoulder. The future of blockchain and all the benefits it offers depend on it.
Industry must do its part to act transparently and in the best interests of consumers, despite the lack of regulation. But without oversight, we will continue to see examples of companies failing to put the interests of consumers first. That’s why I’m calling on Congress to pass three key measures in 2023 to provide consumers with the protections they need.
First, clarify the definition of the legal status of digital assets: when are digital assets classified as securities, commodities, or something in between? And how is it defined? It’s the government’s role to clarify this for large and small participants – not just to pretend clarity exists – because consumers are the losers.
Second, demand that stablecoins are stable: Terra’s collapse caused $60 billion in value to disappear overnight. Consumers should be assured that stablecoins should be backed by high-quality liquid assets on an individual basis. Stablecoins are essential to the true utility offered by the blockchain. The rules of the road here are helpful to consumers and will lead to even more innovation.
Third, digital asset exchanges. As we have seen with FTX, consumers are exposed to risk when trading and holding their assets with exchanges. While some of these risks are well understood, Congress needs to ensure that consumers have the necessary safeguards to interact with these platforms.
Related: My Story of Telling the SEC “I Told You So” on FTX
My experience on the content side of the web has taught me the importance of early engagement with policy makers to help shape regulation for emerging technologies. But I learned that lesson the hard way – we didn’t engage. Instead, we asked the government to believe that we would succeed on our own. We thought we had all the answers. Some regulations already existed for data collection activities on the Internet, but none took into account the data collection that tech companies were doing every day. Balancing our results with the best interests of consumers created a big gap that we thought we could manage. It is clear now that this has led to a data privacy crisis where people have become the product, and our collective and individual privacy has disappeared before our eyes.
I see some parallels with blockchain, the new emerging technology. It is essential that the ecosystems developing the products and services based on this technology continue to work alongside the public sector to develop the regulations that will provide clarity and guarantees. I know the limitless potential of blockchain and look forward to helping forge the public-private partnerships needed to bring more stability to this industry. And I hope that a new Congress will meet us halfway.
Denelle Dixon is the CEO and Executive Director of the Stellar Development Foundation. She previously served as Chief Legal Officer at companies such as Terra Firma and Yahoo! after graduating from Hastings College of the Law at the University of California. She completed her undergraduate studies at the University of California, Davis.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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