Self-regulation will be critical in managing the rapidly changing landscape of the cryptocurrency industry in order to maintain its independent and decentralized nature.
Months after the collapse of the Terra ecosystem that pushed the cryptocurrency market cap below $1 trillion, the industry has embarked on a long process of rebuilding not only retail confidence but also faith in itself. Current market conditions are partly due to structural weaknesses in smart contracts, models, and governance processes. This is evident by many hacks And the exploits which has Reserved place This year the defective projects swelled icons which is controlled by suspicious operations.
Implementation of stricter self-regulatory standards will be essential for the industry to build a sustainable and innovative alternative financial ecosystem. On the other hand, if the industry continues to ignore this problem, it is certain that outside regulators will intervene aggressively, forcing the new system to become centralized in order to comply with the old rules.
Self-regulation can promote the next stage of coding
Self-regulation in various permutations has been successfully implemented in many industries with government supervision, which has led to more leniency in external regulation.
The advertising industry is a prime example of its implementation of subjective standards to protect the privacy of users’ data. As the Internet industry grew in the 2000s, concerns began to emerge about user data being used by third parties without consent. The Federal Trade Commission, a US government agency, has proposed online privacy guidelines for the collection and use of user data for online behavioral advertising. In response, representatives of the advertising industry developed a self-regulatory program based on recommendations of the Federal Trade Commission (FTC). The program included “Advertising Options” to provide users with more control and independence over their data, with the option to opt out of personal targeting.
As a result of continued proactive efforts by the advertising industry, they have been able to avoid high external regulation and, instead, operate under the supervision of the Federal Trade Commission. This relationship shows, where government aligns with industry, that innovation can be encouraged while also protecting consumer needs.
Without industry-wide participation, there is no point in self-regulation
For the cryptocurrency industry to be taken seriously in self-regulation, it requires industry-wide participation. A research paper published in the American Journal of Political Science Shows That’s when there high Participation is self-regulating, the interference of pro-regulatory forces is greatly reduced. Meanwhile, forces loyal to the organization controlled 68% of the cases that were present number self-regulation. Cases with high participation in the number of self-regulatory firms with extensive self-regulatory practices saw pro-regulatory forces drop to 4%.
Significant self-regulation can preserve the values of decentralized finance – such as no permission – while keeping users protected.
One area where self-regulation will be necessary is privacy in DeFi. All individuals deserve privacy over their information as well as their money. However, private financial systems are known to be used by nefarious actors, leading to actions such as Sanctions against Tornado Cash.
An example of a self-regulating privacy solution is the creation of subscribeable whitelists in private DeFi systems. As a user, you will be able to choose to subscribe to one of the many possible whitelist services when depositing and transacting in Private DeFi. This means that although you will not be able to identify yourself, when you later want to send money to a central exchange, or sell your assets, anyone will be able to verify that your money was previously whitelisted and, therefore, was not the source of the funds criminally. This whitelist provider may be a central exchange, a government organization, or an independent third party where you have completed your Know Your Customer requirements.
As a user, you can, if you wish, choose not to register with a whitelist, or to register with a less reliable list. But this would make it difficult to prove the source of your money or put it back into the traditional financial system.
The crypto industry has matured significantly with each cycle, proving its resilience and optimism for evolution. Industry has gathered for Improving privacy using proofs of lack of knowledgeand create cheaper and faster options for users through Layer 2 solutions and the first layer alternative blockchainCompensating users who were victims hacks And the Failed Projects.
If the industry is to continue to drive development roadmaps without undue regulation, autonomy must be gained. The tide may be starting to turn as governments gain weight, as seen in the Tornado Cash penalty and Proposed ban for two years On stable coins arithmetic. While self-regulation may be difficult to coordinate, in the bigger picture, it reaffirms confidence to governing bodies that the industry is taking proactive measures to address its weaknesses. It leaves open the possibility of collaborating with regulators to preserve the identity of the cryptocurrency that has attracted so many in: financial independence and inclusion.
To be sure, these practices may seem similar to the practices in Web2 that implement some of the features of centralization. However, the application of these standards by parties investing in the spirit of the industry may be the silver lining required.
Self-regulation will be an important approach to managing the evolving landscape of the cryptocurrency industry. The extent of innovation possible, and vice versa, the enforcement of government regulations will be reflected in how the industry proactively organizes itself. To usher in a new era of sustainable growth shaped by those who truly understand what the crypto industry wants and where it is heading, real fundamental changes and self-regulation must take priority.
Will Harbourn He is the co-founder and CEO of Rhino.fi, a single gateway to the multi-line, gas-free world of Web3. An early pioneer in the Ethereum ecosystem, he entered crypto full-time when he joined Bitfinex in 2017 to lead the incubation and launch Ethfinex Trustless. Ethfinex evolved into DeversiFi in 2019 and was rebranded to Rhino.fi in 2022. Before entering the crypto world, Will was a technology consultant at Cambridge Consultants and IBM.
This article is for general information purposes and is not intended and should not be considered legal or investment advice. The opinions, ideas and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
#Government #crackdowns #coming #cryptocurrency #begins #selfregulate