We cannot afford to wait for the government to lead the regulation of cryptocurrencies

The FTX drop it was just the latest calamity to hit the cryptocurrency world and it caused a cascade of closures, failuresand losses for individual and institutional Merchants, governmentsand companies that have used cryptocurrencies for financing and trading. Crypto it’s been down before and recovered, but losses this time it may be too big for trading to return to “normal”.

The overwhelming reaction among governments and traditional financial gatekeepers has been to demand regulations on what has been a free and open commercial market.

Among those asking for regulations is US Treasury Secretary Janet Yellen, who “remains rather skeptical” of cryptocurrency in general. “I think everything we’ve experienced in the last couple of weeks, but also before, says this is an industry that really needs proper regulation,” she said. Right now, the industry lacks the necessary regulations to protect consultants, but plans are being made to do just that, Yellen told reporters.

Yellen’s statement was nothing new; for years, governments have said they will regulate cryptocurrencies. But they didn’t do much. Yellen’s speech was much the same lip service. The time has come for the cryptocurrency industry itself to rise to the challenge and adopt its own regulatory framework.

What is needed is a mass gathering of everyone to whom the free decentralized financial system matters — platforms, miners, investment firms, and even individual investors — to come up with ideas for how the industry might regulate. The rules must be enforced, of course, and the rally should determine who will be responsible for that enforcement.

One idea would be to recruit the best accounting and management firms, the ones that oversee and control private and even state lotteries. Among the requirements these supervisors might impose is a backup test rule, ensuring that cryptocurrency held or stored by an organization or platform is backed by “tangible” assets.

Freedom of trade – and private trade – is indeed the “secret sauce” of cryptocurrency and goes against the creeping and growing regulation of the economy that the guardians are arguing. With that, some regulations, or at least industry standards, are needed. The steps should ensure basic rights, like making sure small investors aren’t ripped off. And recent events in the cryptocurrency world make it clear that light regulation is needed, at least when it comes to investor protection.

In addition to ensuring that accounts and platforms follow the rules it sets, the regulatory body will need to develop best practices and methods for dealing with stress, investor panic and rapid changes in the value of cryptocurrencies. Part of these best practices could also include recommendations on developing advanced algorithmic trading tools that, for example, stop trading when prices break out of a pre-set framework, essentially halting trading as the market absorbs the situation and recovers.

If the industry takes this gigantic but important mission into its own hands, regulations will not only materialize faster, but will also be suited to the fundamental ethics of cryptocurrencies. The regulations that governments likely have in mind – if they ever get them in place – will likely cripple, if at all, the things that draw people to cryptocurrencies in the first place: anonymity, the freedom to trade with whoever they want in the way they want need and independence from fed fed cycle of expansion and contraction we are all subjects.

The “regulations” will likely convert cryptocurrencies into a “digital currency,” not unlike the dollar, except that it will be online, and thus even easier for the government to track, without the need for blockchain.

That would be a shame, because cryptocurrencies represent values ​​that many people around the world aspire to. But if the regulations placed on cryptocurrencies could reflect those values, ensuring that trading remains free while protecting investors and organizations from the kinds of excesses FTX and others were guilty of, then those values ​​could be preserved.

The current scandal is disappointing to say the least, and bad actors clearly need to be rooted out. Cryptocurrency advocates must constantly make it clear to potential investors that they are dealing with a high-risk and often volatile asset; and they need to use advanced technology to ensure their investors are protected. But we must keep in mind that the industry is much larger than these bad actors and that the ideas, principles and ideals that are emerging from cryptocurrencies will, without a doubt, have a huge impact on our freedoms. If we as an industry are serious about our future, we need to act now to develop a regulatory framework.

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