Why Ignoring and Avoiding the Blockchain Compliance Regulators is a Bad Idea for Crypto Projects
Even though most within the crypto community will remember the year of 2018 as the year when the crypto market crashed after reaching its current all-time high, another equally as important issue is regulatory oversight. Things have been progressing slowly regarding regulating the crypto space, even though regulators are still inviting firms to cooperate with them on stabilizing the crypto space.
It is a well-known fact that regulators, such as the US SEC, wish to be included on the companies' plans regarding innovation, They want to be asked for permission, and not forgiveness when it comes to making new ideas into trends.
In the last several years, the SEC was not often forced to take action, and it happened only five times in 2017, and only once in 2016. However, then came the era of ICO, which blew up amidst late 2017 bull run, and since ICOs were completely unregulated at that point, it soon became clear that not many of them will survive. As a result, a lot of investors' money will never see a return, even without including scams into the calculation.
According to the US SEC Commissioner Jackson, this is what financial markets would look like if the SEC did not do its job. Following the ICO era, the SEC felt obligated to act, which is why it had as many as 18 enforcement actions in this year alone. The same is true for other regulators, such as the CFTC, which prosecuted enforcement actions regarding individuals and companies alike.
In the end, ignoring the regulators turned out to be a bad call for a lot of people and firms, all of which ended up eliminated from the market. Not engaging leaves the space without regulatory guidance, or protection from bad actors, Soon enough, bad facts appear and cause bad laws, If regulators notice these this, they usually tend to intervene, and those not willing to cooperate with them are only making it difficult to remove damaging aspects.
In other words, forcing the SEC to bring regulations by enforcement is likely to have a much more damaging impact. Meanwhile, cooperating on establishing regulations with regulators can provide numerous new opportunities through collaboration with experts. Simply put, it is easier to find a way to agree with the SEC and other regulators than to go to war with them and hope for the best.
Going to war did not do much to help the crypto industry, as the SEC's Division of Enforcement ended up bringing orders against unregistered exchange platforms, broker-dealers, promoters, hedge funds, and more.
The SEC Remains Open For Collaboration
As everyone is undoubtedly aware of, 2018 was the year of change in the crypto industry. The SEC attempted to help by pointing out things that those participating in the crypto markets should not do. It also announced the FinHub, which is Strategic Hub for Innovation and Financial Technology, dedicated to facilitating public engagement with the SEC.
Similar moves indicate that the SEC is willing to learn and understand the new technologies and trends correctly. Since then, the regulator has made numerous praised decisions, which further shows that cooperation with them can lead to progress. Furthermore, the SEC is not alone in its attempts to establish better communication with those connected to the crypto space. The CFTC did the same through their LabCFTC project.
Despite all of these efforts, however, only a handful of crypto market participants decided to cooperate with regulators, This is unfortunate, as working together would be beneficial to the crypto space, especially in situations like these, where the SEC and CFTC are asking for comments and seeking discussions regarding different issues.
While many in the crypto world might see working with regulators as a bad decision, the fact is that it is not. They will try and bring regulations with or without the help of those who will be affected by said regulations. By participating, companies and the public can ensure that there is no oversight which might cause damage to them. With this in mind, the situation will hopefully change in 2019, and things such as the ICO era will never have to happen again.