Self-regulation will be critical in governing the rapidly changing landscape of the cryptocurrency industry in order to preserve its autonomous, decentralized nature.
Months after the collapse of the Terra ecosystem that propelled crypto’s market capitalization below $1 trillion, the industry is beginning the long process of rebuilding not only retail trust but also faith in itself. Current market conditions are in part due to structural weaknesses in smart contracts, models and governance processes. This is made evident by the many hacks and exploits that have taken place this year and the ballooning of projects with flawed tokenomics and that are governed through dubious operations.
The implementation of stricter self-regulatory standards will be necessary for the industry to build a sustainable, innovative alternative financial ecosystem. On the other hand, if the industry continues to ignore this problem, it’s certain that external regulators will step in hard, forcing the new system to become centralized in order to comply with legacy rules.
Self-regulation could supercharge the next stage of crypto
Self-regulation in various permutations has been successfully implemented in many industries with government oversight, resulting in more leniency in external regulation.
The advertising industry is a prime example with its implementation of self-initiated standards to protect the data privacy of users. As the internet industry grew in the 2000s, concerns began to emerge over users’ data being used by third parties without consent. The Federal Trade Commission, a United States government agency, proposed online privacy guidelines for the collection and use of users’ data for online behavioral advertising. In response, representatives of the ad industry developed a self-regulatory program based on the FTC’s recommendations. The program included “ad choices” to provide users with more control and autonomy over their data, with the option to opt out of personal targeting.
Related: Federal regulators are preparing to pass judgment on Ethereum
As a result of continual proactive efforts by the ad industry, they were able to avoid high external regulation and, instead, operate with oversight from the FTC. This relationship, where government and industry align, shows that innovation can be encouraged while also protecting consumer needs.
Without industrywide participation, self-regulation is futile
For the crypto industry to be taken seriously in…
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