6 ms·

Exactly. However the serious participants in the cryptocurrency space have been begging for regulation. The complaint however is that the regulations that have

Exactly. However the serious participants in the cryptocurrency space have been begging for regulation. The complaint however is that the regulations that have been proposed are trying to pidgeonhole the different parts of digital assets and decentralised finance (not defi but decentralised financial services as a whole) into existing categories that they don't cleanly fit in. Cryptocurrency for example isn't a commodity (representation of a resource) or a security(representation of ownership/control in an organisation/system). It can never fit cleanly under one definition or the other. Some tokens would fit cleanly under the definition of a security, some under the definition of a commodity, and some cleanly under neither. Likewise, node, relay, and validator operators for networks don't really fit cleanly under any given existing set of regulatory guidelines. Regulations for Money Service Businesses for example are overly restrictive and essentially outlaw any existing cryptocurrency operator from even attempting to operate in the US. It's not that the stated goals are impossible to comply with but rather that the specifics of the regulations are. Conversely, some of the much laxer proposed regulations wouldn't adequately cover operators and would leave the door open to abuses. AML and KYC regulations are particularly problematic. They mean well and the spirit of the regulations should be adhered to but they have not been written in a way that is compatible with this tech. Networks with privacy preserving transactions can comply with AML & KYC. Projects on those networks can as well. It won't however be in a way compliant with the direct reporting of user identities. Even if you wanted to comply with KYC & AML, you physically couldn't. Instead you can build infrastructure to comply KYC and AML via DIDs, ZK-proofs, and conditional release of private information (via functional encryption and a number of other techniques). There's a multitude of ways to handle the regulatory complexity without legally crippling privacy preserving & decentralised tech. It just requires that regulators actually work with the communities that have been trying to do things proper and kosher. Instead regulators have essentially ignored the industry's requests & proposals in whole, claimed to have heard nothing, and plowed forward with pushing regulations that would cripple the legitimately useful technology in the space.

hef19898 4y ago
Begging for regulation, like SBF? Officially regulated or not, as an exchange you can still insist on a) have one of the big 4 adivise you on whether you are a bank, a broker or whatever else exists in finance b) define internal controls and processes based on a) and have c) one of the other big 4 properly audit you against b). SBF even admitted that his insistence on regulation was just a front.
- CuriousCosmic 4y ago
  Oh I agree. Traditional centralised exchanges (CEX) are largely normal exchanges. Of all the things in the cryptocurrency space, they are one of the only things that cleanly fits into an existing box. Binance, FTX, Coinbase, Kraken, CoinEx, etc are all just traditional financial exchanges and should be forced to comply with existing regulations because they can. They can do traditional KYC and AML in addition to the controls you mentioned because they are centralised services that directly interact with traditional financial services (banking, wire transfer, etc) The only real open question for those services is asset classification. If those services wanted to comply with regulations, they could do so voluntarily but they aren't actually interested in that like you mentioned. The issue is that any time regulations come around, they end up misclassifying the network and decentralised projects in the process. TLDR: Agreed on all accounts with regards to centralised exchanges. My main complaint is that so far the suggested regulations have not fit well onto the rest of the space.
  - stanleydrew 4y ago
    I guess this might be a nitpick, but I don't think most cryptocurrency exchanges do function like "traditional financial exchanges." They seem to operate more like a combination of exchange and brokerage. I'm not an expert but I don't think "traditional financial exchanges" hold assets to be traded on behalf of customers. I think they are just meeting points for traders, and they host the public order book.
    - CuriousCosmic 4y ago
      ah good point. misspoken on my end. They operate like both the exchange and broker.

hef19898 4y ago

Begging for regulation, like SBF? Officially regulated or not, as an exchange you can still insist on a) have one of the big 4 adivise you on whether you are a bank, a broker or whatever else exists in finance b) define internal controls and processes based on a) and have c) one of the other big 4 properly audit you against b). SBF even admitted that his insistence on regulation was just a front.

CuriousCosmic 4y ago
Oh I agree. Traditional centralised exchanges (CEX) are largely normal exchanges. Of all the things in the cryptocurrency space, they are one of the only things that cleanly fits into an existing box. Binance, FTX, Coinbase, Kraken, CoinEx, etc are all just traditional financial exchanges and should be forced to comply with existing regulations because they can. They can do traditional KYC and AML in addition to the controls you mentioned because they are centralised services that directly interact with traditional financial services (banking, wire transfer, etc) The only real open question for those services is asset classification. If those services wanted to comply with regulations, they could do so voluntarily but they aren't actually interested in that like you mentioned. The issue is that any time regulations come around, they end up misclassifying the network and decentralised projects in the process. TLDR: Agreed on all accounts with regards to centralised exchanges. My main complaint is that so far the suggested regulations have not fit well onto the rest of the space.
- stanleydrew 4y ago
  I guess this might be a nitpick, but I don't think most cryptocurrency exchanges do function like "traditional financial exchanges." They seem to operate more like a combination of exchange and brokerage. I'm not an expert but I don't think "traditional financial exchanges" hold assets to be traded on behalf of customers. I think they are just meeting points for traders, and they host the public order book.
  - CuriousCosmic 4y ago
    ah good point. misspoken on my end. They operate like both the exchange and broker.