Is Making the Crypto Space Legally Compliant Paving the Road to Mass (Blockchain) Adoption?
The rise of blockchain has pushed cryptocurrencies to the forefront and enabled them to reach more and more people every day.
And while crypto mass adoption has been visible more than ever with currencies like Bitcoin and Ethereum, others didn’t have such an easy time taking off.
Bitcoin accumulation has created an abundance of wealth for those who own it, while Ethereum has provided business opportunities via creations like smart contracts. But there were also cryptocurrencies like Dogecoin and SpaceBit, and, most famously, Ethereum’s DAO that failed quickly after the launch because of unclearly mapped progression paths, bad publicity, security breaches, and unethical behaviour.
In that sense, many people believe that the reason for these shortcomings is the absence of regulations and frameworks that prevent bad business practices and malicious behaviour. The continued ability to conduct all these activities in the sector, unchecked, has resulted in the crypto market being seen as a space that lacks regulation. This begs the question: does blockchain mass adoption hinge on the creation of relevant and forward-thinking legislation?
The primary concern for which a suitable legal framework could offer a long-term solution certainly is the safety of all participants and their assets.
Even though a large part of the crypto and DeFi space’s appeal lies in the absence of a central governing institution, that also means that there is no single, relevant entity to regulate the legal aspect of crypto transactions.
It seems that for the crypto space legal standard provision may be necessary to bolster mass adoption the same way quality blockchain and identity management solutions are essential for providing a seamless access point to blockchain-based services.
Countries all across the world are only just starting to accept that Bitcoin and other cryptocurrencies aren’t going anywhere and that they need to move forward with adjusting their legal and financial systems in the same direction. China, for example, is actively working on creating a national strategy that will enable crypto mass adoption in this country, even though it is currently limiting its citizens in the scope of their crypto transactions.
The European Union is also working towards setting up a universal legal framework for all the members, while some countries that already have a growing community of crypto users have come to realize they need to create individual laws that fit best with their own specific national systems.
And for crypto mass adoption – the sooner the better.
In the UK, for instance, there is a question of regulatory clarity since all legislation regarding companies engaging in crypto activities falls under existing guidance and there is no statutory obligation for them. This guidance refers to FCA-regulated entities following already existing wide range guidance requiring these companies to submit an annual financial crime report to the FCA and an obligation to report any suspicious activity. But the scope is not comprehensive — there is ambiguity as to the precise activities referenced for making crypto space legal and much is open to interpretation. Clearly, in the UK, there is still a great need for clear compliance obligations for market participants.
On the other hand, the US seems to be making strides in the right direction by launching a new regulatory framework for payments and cryptocurrency companies. With this new initiative, regulators from 49 US states have agreed on a single set of supervisory rules that will “ensure compliance with regulations on anti-money laundering, cybersecurity, financial condition and other areas”.
Having in place globally enforceable legislation would push forward blockchain mass adoption by resolving potential multi-jurisdictional issues that may arise between users from different countries participating in transactions on the same blockchain.
Taxation, the issue for token issuance and DeFi dapps users, as well as the infringement of intellectual property rights and the steps necessary to entrench value in dapps would also need to be regulated. Special attention is already being paid to anti-money laundering efforts and identifying the origin and uses of the assets in circulation.
For mass adoption of blockchain technology lawmakers would need to make a shift and include it in the regular operational channels while resisting the urge to limit it within the confinements of traditional financial and legal institutionalization.
If these hurdles can be overcome then it seems that we can all expect massive changes in the way all types of monetary means are created, owned, spent, and ultimately, perceived in our future. And the future has already started – all we need is commitment and time.