Isn't This the Right Time to Regulate the Crypto Industry?

The collapse of FTX, the no.3 Cryptocurrency exchange only after Bitcoin and Ethereum has not only sent shock waves through the financial world but nudged the government to start thinking seriously of putting in place some regulations for the De Fi industry.

The crypto industry has run largely unregulated up until this moment.

The call for regulation will not sit well with Crypto enthusiasts who ironically love the Crypto space because of the lack of regulation. Most conservative patrons of the Crypto space are in favor of some regulation.

How to strike a compromise between these two sets of patrons with widely differing views will be the challenge in a bid to set up a regulatory agency to safeguard transactions on the De Fi portal.

The Pro’s of instituting Regulations in the De Fi space

Let’s look at the pro’s of this move to regulate the Crypto industry.

For starters, the Crypto market is a wildly volatile one. It’s up one time, it’s down the next moment like the proverbial yo-yo. Regulation will bring in some form of stability to this market with the possibility of boosting confidence in patrons and outsiders as well.

Setting up a regulatory agency for Crypto would help to give guidance to an otherwise unruly and uncharted territory. Such guidance would lead to a clean up of the system.

Such a clean-up would no doubt attract institutional investors who are aware of the potential Crypto has of eclipsing the fiat currency in the long run

A regulatory agency will give protection to Crypto customers just as OCC gives to bank customers which make them go to sleep easy knowing fully well that if the bank goes belly up the following day, they will be paid a certain percentage of their savings.

There is little or no protection clause for customers in the Crypto world. As a result, customers have lost billions of dollars without a prospect of some repayment.

A third party Customer protection for patrons has the potential of preventing fraudulent activities and scams which are becoming commonplace in the Crypto ecosystem.

The Con’s of instituting Regulations in the De Fi space

On the con side, most Crypto enthusiasts would tell you they are drawn to Decentralized Finance because of its lack of government control. The allure of non-regulation is one major attraction for most people.

They will point out that the Blockchain offers enough protection for their investments and they do not need any government interference as in fiat currency.

The Blockchain is an immutable ledger that allows digital information to be recorded and distributed unedited. Every completed transaction is recorded on the Blockchain and can not be deleted.

The pitfall in this argument is that for the Blockchain system to work perfectly, there should be a regulatory body in place that will track a defaulting wallet and return any missing sum of money to its rightful owner.

Let me narrate my personal experience. Not too long ago, I mistakenly sent some money to a wallet other than my own. This happens quite often in the De Fi world and tragically it involves a large sum of money in some instances.

I could see the address of the wallet I mistakenly sent the money to, but how do I retrieve it? The wallet address is a long stretch of alphabets, numbers and other characters.

If there were a regulatory body in place, I would have just reported the incident and it would be its responsibility to track the owner of the wallet and retrieve my money.

My Take

I welcome some form of regulation because I think the lack of it is what is holding Cryptocurrency from general acceptance by the skeptical public that wants to see some form of regulation in place before throwing in their hat.

I also believe that instituting a regulatory body to oversee the Cryptocurrency space will sanitize the ecosystem of large scale scams and frauds. The fall of FTX is traceable to greed and gross mismanagement because there was no oversight.

A sanitized Crypto environment will only be inviting to institutional investors who will be too happy to bring in other big time investors and members of the public. In no time Crypto will be in the mainstream.

Do you think the Crypto space should be regulated or Not? What’s your take?