How smart supervision can improve the future of blockchain – QNT

Due to the extreme positions of both parties, some people will lead us to believe that decentralized technology and regulation are mutually exclusive.Although this narrative has become common, a more evolved view is Decentralization and supervision are inevitable, So the best results will be produced with the unity of regulators and innovators. But what will this cooperation look like?

At the Stellar Development Foundation, our view is that regulators and innovators will (and should) influence each other, which means that both parties should be prepared to compromise. Lets start with some honest self-reflection: the intrinsic qualities of blockchain or cryptocurrency should not be completely unregulated, but on the other hand, the technology should not be banned or unfair just because it is new or different Local supervision.

Distributed ledger technology is a paradigm shift. Traditional finance is vertical and intermediate, while decentralized finance (DeFi) is flat and peer-to-peer (P2P). The problem we are facing now is that financial supervision is almost unanimously based on the premise of supervisory intermediary-the absence of intermediary means that there is no judicial linkage. It is precisely because of the lack of clear jurisdiction that regulators are nervous about the future of decentralization. Financial Action Task Force (FATF) Accepted This concern is clearly reflected in its recent draft guidelines on virtual assets and VASP:

In addition, the full maturity of these protocols that support P2P transactions may herald a future without financial intermediaries, which may challenge the validity of the FATFs recommendations.

However, as we have before famousWhen it comes to the draft FATF guidelines, concerns about losing market share or shrinking regulatory domains do not form the basis for sound decision-making.

related: Draft FATF guidelines for DeFi compliance

Often, the fear of a paradigm shift will lead to a regulatory crackdown. De-risking is a typical example. As regulators promulgate more and more stringent anti-money laundering regulations, companies have responded by cutting off services to less profitable customers. As a result, regulatory and business interests are served, but more and more individuals, especially the global poor and the companies that serve them, find themselves shut out of the financial system. FATF recently recognition Its role in perpetuating this harmful problem. However, those who are forced to withdraw from the financial system due to regulation are those who are most empowered by blockchain technology by reducing reliance on intermediaries. At the Stellar Development Foundation, we have witnessed this firsthand through cooperation with partners such as Leaf Global and Tala, which provide blockchain-based financial services to the working poor and immigrants fleeing disasters or persecution in their home countries.

Despite these benefits, the national response to blockchain has been mixed.Favorite country India, Turkey with Nigeria See fear, others like Singapore, Switzerland, Bermuda, Ukraine right now Savior Recognize the opportunity and develop a new regulatory framework that includes the decentralized nature of the blockchain. They are reaping rewards. These countries are becoming global blockchain technology centers.

Innovators and entrepreneurs are attracted by their established and stable regulatory environment. Although the United States and the European Union are increasingly calling for regulatory crackdowns on cryptocurrencies, the countries listed above have gone further.

The United States and other advanced economies, especially Western advanced economies, are rapidly approaching an inflection point. The future decision is no longer whether to supervise, but how to supervise. Fortunately, policymakers do not have to make decisions in a vacuum, and it is best to learn from the two groups of countries mentioned above-those that try to keep cryptocurrency away and those that welcome it. Without exception, those who actively adjust regulators to adapt to the technology are more successful than those that try to ban it. However, although it is not too late for the United States to follow successful examples, it must definitely choose to do so.

Self-custodial wallet rules proposed by the Financial Crime Enforcement Network (FinCEN) provide A useful case study of this choice. From the very beginning, FinCENs proposal opposed decentralization and personal empowerment. Although it will not explicitly prohibit self-hosted wallets, many people think it will be in practice. However, the blockchain community responded forcefully, posting a record number of comments in a short period of time. One of the themes that emerged in these comments was that, due to the inherent transparency of the public blockchain, FinCEN already had access to most of the information sought by the proposal. To its credit, FinCEN seems to have listened to opinions and will seek further contact with those who know the technology best.

Although we will have to wait to see the end of the story, FinCEN now seems to be participating in a method of working with the industry, which is conceived by the rulemaking process-but not always in practice. Compromise is not easy, but it will produce the best results.

related: Authorities are seeking to close the gap in uncustodial wallets

The mission of regulators is to protect markets, not to ensure that they will never change. Policy makers should accept that decentralization is a new and different paradigm, and it deserves to have its own regulatory approach. So far, the industrys resistance has not been the idea of being regulated, but being forced into an inappropriate regulatory framework. Nevertheless, regulators and innovators can find a middle ground, but only if both sides maintain an open mind.

Likewise, the blockchain community must better explain why and how the technology is different, educate decision makers about the actual risks, while highlighting real examples of its benefits. In addition, we should accept appropriately tailored supervision.

After all, the legitimacy of the technology accepted by regulators is likely to be the last obstacle on the road to mass adoption.

The views, thoughts and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Seth Hertling He is the head of policy and government relations for the Stellar Development Foundation, a non-profit organization that supports the development and growth of Stellar. Stellar is an open source network that connects the worlds financial infrastructure. Seth started his career as a securities regulator and most recently served as an executive director and assistant general counsel for public policy and regulatory affairs at FS Investments, a leading alternative asset management company. Seth holds an MBA in Finance from Wright State University and a JD from Ohio State University.

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How smart supervision can improve the future of blockchain - QNT