Concerns that over-regulation can stifle innovation and hinder the growth of Web3 are valid. But proper rules and laws can equally save and supercharge crypto.
This op-ed is part of CoinDesk’s State of Crypto Week sponsored by Chainalysis. Anne-Sophie Cissey is the head of legal and compliance at Flowdesk, a Paris-based market-making technology company.
Regulators have in the past stifled or curbed innovation when hastily responding to unexpected events. While the contagion of FTX last year demonstrated the need for regulation that enforces transparency and customer protection, the recent rapid crackdown has lacked a cohesive framework.
In spite of that, regulatory oversight can also be a force of stability, transparency and legitimacy for emerging industries. Thus it is more important now than ever for Web3 to collaborate with regulators to ensure the future of their emerging industry. There are many compelling Web2 examples where regulation played a crucial role in strengthening the industry’s foundations.
Regulation encourages businesses to act properly, balancing privacy with financial freedom
One such example is PayPal. The company secured an alternative avenue for consumers and merchants alike to engage in financial processes without the need to set up a bank account.
See also: What’s Wrong With PayPal’s Stablecoin? | Opinion
Responding to regulation — PayPal went on to become one of the first successful online payment providers, transforming payment services from a private good to a public good.
This innovation came during the backdrop of intense anti-terrorism and money laundering litigation as mandated by the PATRIOT Act that sought to guarantee greater security for American citizens. The regulation changed PayPal. It obligated the company to provide a robust means through which it could prove that it properly vets its customers — while providing users with easy access to finance.
PayPal’s compliance with the legislation enabled the company to expand its services beyond the United States, too. This expansion helped to increase PayPal’s revenue and market share, while also providing greater convenience and accessibility to its users.
Similarly, regulation in crypto can encourage greater transparency by utilizing blockchain’s distributed ledger technology. We’ve seen…
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