How Can International Crypto Standards Influence The Space?
The crypto space has grown big in the last several years. It offers over 2,000 coins, numerous blockchains, and the number of trading platforms and crypto exchanges is constantly on the rise. While this is a good thing that shows that the space is progressing, the fact that each project is on its own makes it very difficult to introduce any universal standards.
This is one of the reasons why cryptocurrencies have yet to be adopted since regulatory uncertainty is one of their biggest problems right now. Of course, there were numerous attempts to resolve this issue, especially in the last year. Different groups dedicated to solving these problems emerged, with some of them trying to create international standards regarding the way platforms are run, while others tried to do the same on the national level.
Recently, however, another theory started gaining popularity, and that is that crypto might not be able to be standardized in the first place. Making it standard might also prevent innovation, which is yet another concern of those trying to regulate the space.
Global Digital Finance's executive director, Teana Baker-Taylor, recently stated that GDF aims to prove that self-driving and self-governance is the best practice for the industry and its consumers. Furthermore, it inspires confidence in digital currencies, which grows just as the sector itself continues to mature. Simply put, the GDF wants to create voluntary guidelines, as well as codes of conduct for various aspects of the crypto space, including wallet providers, token sales, rating sites, crypto exchanges, and finally — cryptocurrencies themselves.
The association already has a lot of well-known names on its list of members, including Circle, R3, Diginex, Coinbase, ConsenSys, and others. In addition, it was confirmed that the association has already established contact with public institutions and relevant lawmakers. And, while regulators have mostly been sending mixed signals regarding the idea, the fact is that the association features over 250 individuals and companies, which has attracted the necessary attention.
In addition, the GDF has gone beyond just proposing codes of conduct. They are also working on creating a taxonomy for crypto, which will organize coins in three different groups, including consumer tokens, payment tokens, and financial asset tokens. Since governments of the world have been having issues with defining digital currencies for years now, this effort is also believed to be more than necessary. The only issue is that governments still do not want to recognize and classify digital currencies as assets and money, which is why they might completely disregard GDF's classification.
Governments have started developing an interest in crypto, and no matter how much they are opposed to them, this interest is the reason why groups such as GDF have emerged. Now that they are here, the crypto world itself has the opportunity to influence the government policy creation. One such group, called FATF (Financial Action Task Force), was originally established to put a stop to money laundering. This group also managed to bring numerous changes to virtual assets regulation back in October.
While their focus is to combat money laundering and funding of terrorist attacks, they also allow various crypto services to operate according to with their own needs, as well as with the needs of their users. In other words, all monitoring of crypto-related services is only done for AML/FFT purposes. They see no reason to interfere with issues regarding crypto decentralization or volatility.
On the other hand, there are also other groups and their representatives, such as the German Federal Financial Supervisory Authority's chairman, Felix Hufeld. He believes that the global crypto community is the one who needs to come up with international standards that will be used for handling ICOs. According to him, the number of ICOs is going up, as well as the money volume that they are raising. Meanwhile, their investors only have minimal rights, which is something that has to change.
While this might limit ICOs and prevent them from doing certain things, governments were quite slow when it comes to making their move. Thanks to that slow reaction, groups such as GDF can do it first, and bring a much crypto-friendlier set of standards.
In the meanwhile, the crypto space continues to develop and grow, which includes the production of new trading institutions. This idea appeared in all parts of the world. In the UK, for example, CryptoUK was established. Its aim is to create new standards that would regulate the crypto industry of the UK. However, the goal is to also go beyond and bring such standards to the international scene.
Many believe that this is the path that crypto regulating will take since numerous such self-regulatory bodies are already working on a national level. However, the day approaches when this will not be enough, and a set of standards for the entire world will need to appear in order for cryptocurrencies to ever enter the mainstream.
While it is a slow process, numerous crypto-based firms are already showing signs of willingness to cooperate with others on developing such standards.
Will The Introduction Of Standards Reduce Innovation?
Indeed, there is a great concern regarding the future of innovation in crypto space if digital currencies have to obey a strict set of standards. Teana Baker-Taylor herself stated that numerous industries have lost innovation due to standards. When it comes to crypto, however, the situation is different. While standards will introduce certain rules that must be followed, it doesn't necessarily mean that these rules will limit the growth of crypto. In fact, they may channel it in a more productive way.
Another fear is that compliant companies might find themselves at a disadvantage when compared to cryptos and corporations that will simply ignore standards. This is believed to be the real danger due to the decentralized nature of cryptocurrencies.
Still, once these standards are set in place, it is much more likely that most companies will comply, and get a chance of collaborating with regulators. Over time, this decision will give them an advantage, according to Baker-Taylor.