Wednesday, October 5, 2022

OPINION: The Validity of Hoskinson’s Crypto Self-Regulation Proposal

On Thursday, Cardano co-founder Charles Hoskinson put forward a new proposal to the Congress about crypto regulations. In his submission, he stated that authorities truly have the rights to make crypto regulations. However, that’s probably all about it. He says that the enforcement of those rules should only be left to software developers.

Authorities should do no more than create crypto regulations — Hoskinson

According to Hoskinson, there is a need to regulate crypto in a similar way to how the banks also self-regulate. After all, the likes of SEC and CFTC are not the ones carrying out the know-your-customers (KYCs) or anti-money laundering (AML) registrations, but the banks. So, in his speech to legislators during the congressional hearing, Hoskinson said in part:

“What needs to be done is to establish those boundaries, then what we can do as innovators is write software to help make that happen.”

Meanwhile, Hoskinson’s comments could not have come at a better time. At the moment, top financial regulators, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), are currently competing with each other, in their bids to win regulatory jurisdiction over the entire crypto industry.

However, arguments have also been put forward regarding the capabilities of any of both agencies to oversee the incredible amount of cryptocurrencies on the market.

How valid is this proposal?

From all indications, Hoskinson’s proposal may turn out to be one of the best things to happen to crypto regulation.

In his argument, Hoskinson mentioned how cryptocurrencies typically store and transfer data. So, invariably, this means that much of the regulatory compliance work he’s hammering about will be automated. And with that kind of “self-certification system” in place, non-compliance can be easily identified. 

Additionally, Hoskinson also mentioned another measure that looks to be even more effective. He proposed that cryptocurrencies could be programmed in a way that transactions will not be completed until regulatory checks are complete. And interestingly, this option leaves no room for errors, being more preventive.

Most importantly, crypto self-regulation will also take away the influence that authorities may want to wield in the future. This is when they might want to start playing the Almighty. And recall, cryptocurrencies are built upon the very foundation of decentralization.

In any case, it seems that the crypto industry may gradually be coming out of its shadow of regulatory uncertainties.  And hopefully, regulators will come up with new rules that will take this brilliant proposal into account.

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