CoinDesk Releases Information Regarding 2018 Blockchain Regulations

  • 14 January 2018
  • Cas Proffitt

Crypto has existed for nearly a decade with loose or nonexistent regulations. With the recent explosion of ICOs around the globe, regulators have taken notice of the market which recently surpassed the Amazon in terms of market capitalization. Moving forward, it is important for startups, businesses, influencers, consultants, and other key players to work with regulators in an effort to create structure for the emerging market.

When creating regulations for an emerging market, it is important to maintain a balance of consumer protection without stifling innovation. Many within the blockchain community fear that regulators alone cannot strike this balance effectively. In order to ensure that they can remain competitive, several countries have taken a “sandbox” stance, allowing blockchain startups to operate under loose regulations.

Business Insider released a report in October which highlights blockchain innovation and regional regulatory friendliness to the industry.

Why do we need regulations?

Clear regulations allow law-abiding projects to operate with certainty that they are not violating any laws, acting in a way that could harm their users, and create communication channels with existing regulators as the technology matures.

Without clear regulations, projects are left with only litmus tests which can be interpreted at the whim of their regional regulator. An example of this is the spike in “Asset Tokens versus Utility Tokens” among projects seeking to function as non-securities. The red tape surrounding securities stands as a barrier to innovation for projects who seek to innovate and disrupt.

It is important to note that securities normally have associations to traditional litmus tests such as the Howey Test, which looks at different aspects, such as an expectation of return on investment. Projects with utility tokens create and sell the tokens to raise funds and build a project, which then takes tokens in exchange for a service, platform usage, or product.

Asset tokens are sold to investors who expect to resell the tokens at a later date for more money than they paid for them initially. Asset tokens can have other uses, but they are normally separate from the platform, and limited in scope.

How will these regulations impact the growth and development of blockchain?

Regulations can have a positive impact on the industry if regulatory bodies collaborate with industry professionals to create new laws. Consequently, the flame of innovation can be extinguished if regulations are set up without working knowledge of the industry or regard for the long-term benefits of the technology.

CoinDesk just released information regarding the growth of regulation in blockchain, and it is clear that law moves slower than the pace of innovation. Laws can take more than one year from first proposal until being published in the federal register. Some potentially applicable regulatory bodies include the Financial Crimes Enforcement Network (FINCEN), the U.S. Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC).

How can regulators strike a balance in blockchain when it moves forward at a breakneck pace?

Regulators are tasked with creating laws to protect consumers from potentially dangerous circumstances, such as Ponzi schemes, dishonest investment opportunities, and outright scams. Innovators are tasked with helping regulators stay up to date with emerging technologies, projects, and systems.

In order to strike this balance, regulators must collaborate with innovators to ensure they have the knowledge and understanding needed to write laws for the consumers, while leaving innovators the ability to grow their within their niche.

Similarly, innovators must provide regulators with the information they need, while simultaneously improving the standards of the industry and seeking to protect their consumers. ICOs regularly warn users against common scam tactics, but sometimes users fall prey to malicious actors. Occasionally, projects themselves fall prey to malicious actors, an occurrence that was noted in the Parity hack which took funds away from projects, such as AEternity, Swarm City, and Edgeless Casino.

What is your outlook for blockchain as regulators enter the space? Let us know in the comments below!

About Cas Proffitt

Cas is a B2B Content Marketer and Brand Consultant who specializes in disruptive technology. She covers topics like artificial intelligence, augmented and virtual reality, blockchain, and big data, to name a few. Cas is also co-owner of an esports organization and spends much of her time teaching gamers how to make a living doing what they love while bringing positivity to the gaming community.