A leading role of tech in crypto policy
Arguments regarding cryptocurrency policy are sometimes depicted as a conflict between opposing sides. Policy formation almost usually involves recognizing and weighing trade-offs, which is not unique to the field of cryptocurrency. Trade-offs in policy are frequently:
- Individual freedoms versus the greater good
- Innovation versus security
- New paradigms versus continuity
- The choice between capturing the upside and protecting the downside
Giving up one item to obtain another causes tension. However, one component, one variable, offers more choices. Technology is that. The frontier curve in economics is pushed outward by technology. It creates new markets in business. In politics, it can satisfy a variety of constituencies. Technology also enables us to meet safety goals in regulation without strangling innovation.
Technology, of course, demands careful consideration and expert implementation. However, when it functions, it empowers and makes challenging decisions simpler. So, how does technology fit into cryptocurrency regulation?
Upgraded crypto
The argument over cryptocurrency policy needs to center on technology. Cryptocurrency itself is a technology, but Layer 1 and Layer 2 blockchains, dApps, zk-SNARKS, and other engineering components are what actually make distributed networks function. However, cryptography technology also comes with auxiliary features that expand its long-term applicability to more people. There was a need for antivirus software, two-factor authentication, encryption, and penetration testing on the present Internet. A new set of technologies is also available to improve the trust and security of cryptocurrency.
With transaction monitoring to assist businesses in managing financial risk and trade surveillance that identifies fraudulent trading, Eventus is a component of this ecosystem. Blockchain analytics are used for financial crime investigations, while code audits to ensure that smart contracts work as intended and custody services protect private keys.
The alternatives available to policymakers increase once they know these enabling capabilities. Instead of needing to specify each and every rule, they can choose to adopt more flexible, principle-based regulations. Furthermore, they have access to private, self-regulatory bodies. Companies that make use of this assisting compliance technology benefit from the ability to create their businesses with openness and trust baked in and send a powerfully good signal to clients and regulators.
Regulator uncertainty: how to navigate it
Anti-money laundering (AML) regulations are clear in relation to cryptocurrencies, and in top jurisdictions, platforms must be watched for fraudulent trading. All restrictions, including those in the crypto-friendly Bahamas, Abu Dhabi, Dubai, and Hong Kong, as well as those in the E.U. ‘s upcoming Markets in Crypto Assets (MiCA) legislation, need to be watched carefully to spot crypto market misuse. In the United States, the United Kingdom, and Australia, the majority of proposed laws or regulations contain some kind of market surveillance.
But guidelines are still being created. Even if baseline legislation is passed in the United States, because crypto is a young business, we will continue to operate in a regulatory gray area for the foreseeable future. We frequently had to cope with ambiguity and make deliberate, considered decisions while operating in the fog at the C.I.A. A strategy, whether for business or national security, must account for various possibilities when dealing with uncertainty.
Focusing on what is under your control is the wisest course of action at this time. People, processes, and technology are a straightforward foundation to adhere to.
People: Look for skilled professionals who can adapt to the lessons learned from other asset classes and apply them to cryptocurrency. They have the ability to cross cultural divides among regulators, financial institutions, and cryptocurrency.
Process: Build compliance-friendly practices by performing risk assessments for market abuse and developing internal guidelines for due diligence, documentation, escalation, and reporting of market abuse situations. Unexpectedly, process-based criteria make up a large portion of what regulators look for.
Technology: The ability to monitor data and stay ahead of any issues can be unlocked in this situation, as was previously said, with the help of the appropriate software stack.
The market integrity of cryptocurrency will suffer if we don’t use the knowledge, procedures, and compliance technology that are effective in other asset classes. Businesses are quicker than policy, particularly those with the foresight to enter crypto.
