According to the AP, Binance, the worlds largest Bitcoin and other cryptocurrency exchange system, said it was time for international regulators to enact laws regarding crypto markets. The company released a list of "10 fundamental rights of crypto users" last week and wants to start negotiations with regulators, politicians and other exchange systems.
The company recognizes that crypto platforms have a duty to protect their users and to introduce processes that prevent financial crime. As well as have a duty to work with regulators and politicians to introduce new, safer standards.
This may come as a surprise to some cryptocurrency advocates given the industrys popularity in part due to its (at first glance) independence from the state and its organs. However, Binance CEO Chengpeng Zhao believes that regulations in this industry are inevitable; This move even allows his company to have a certain place in the negotiations. In addition, it may even attract people who are skeptical of crypto.
Zhao said he has already been contacted by most of the regulators over the past year who have been monitoring crypto. Communication continues for the most part, so Zhao believes now is the right time to support the introduction of a global structure.
He believes it is important for industry participants to play a role in this process. It also adds that some regulations if created in a vacuum may not provide practical results, hence they may not work well.
The more cryptocurrency becomes popular, the more often we talk about regulations, risks and forecasts. Large businesses, professional investors, and even the government of El Salvador are involved in the crypto world; Although critics still do not see the value of this field.
This requirement of Binance reminds some on Wall Street of the approach that large companies use in other chaotic industries.
Gil Luria, D.A. Davidsons technology strategist, says Binance is doing what Uber and Lyft did. They make arrangements for business regulations, and when they reach a certain level, they recognize the need for regulations and are involved in the process of establishing them.
Zhao said Binance makes arrangements for a number of reasons. One of the most insignificant reasons is selfish: less competition will remain in a regulated industry. The little players disappear.
This move is particularly noteworthy given that Binance may start selling stocks in the following stocks (which Zhao hopes). The competitor, Coinbase, has already attracted $ 74 billion in market value on Wall Street.
Such opportunities have attracted both investors and regulators.
KYC & Information Problems
Analysts said they expect approval from Binance to provide transaction accounting to regulators (they will be verified on terrorism financing and similar issues). One of Binances "fundamental rights" that they believe must be protected is strict regulations for derivatives and leverage instruments (both risk and profit are high here).
According to Zhao, most regulators focus on KYC (know your customer) rules, where financial companies try to find out who uses their services. They also take care of consumer safety.
However, the interpretation of these words, according to Zhao, takes place differently in different countries. For example, the fight against money laundering for the United States is a fight against terrorism, while for China, cases of money laundering are noteworthy.
Campbell Harvey, a professor of finance at Duke University, said in his book "DeFi and the Future of Finance" that regulators are still struggling with the possible consequences of new technologies and trying to strike a balance between protecting investors and thwarting innovation. This is naturally a very difficult case so it should not be surprising if we are dealing with periodic lapsus.
Speculation about what type of regulatory restrictions will be imposed on cryptocurrencies is holding back institutional investors, such as the Pension Fund, from investing in cryptocurrencies.
A potential solution
Given all these complex details, Harvey believes that the best solution for the US government is to create a new agency whose main goal will be to take care of the cryptocurrency and its ecosystem.
Zhao, who owns only Bitcoin and Binance coins, said that different parts of the crypto-world sometimes have securities, sometimes commodities and sometimes currencies. The ecosystem is growing day by day, considering that people can create new tokens with the click of a few mouse buttons.
In his view, people may mistakenly believe that crypto contains only one element. When in fact it can improve the exchange of traditional properties with its technology.