[Coinlive Feature] Regulating the Crypto Industry: A Game of Cat and Mouse?

• - Singapore has been tightening up restrictions on crypto trading, further dampening attitudes towards a slumping crypto market.
  
• - The heads of crypto firms generally welcome these restrictions, viewing them as necessary safety nets for all players.
• - However, the crypto industry bases itself on innovation and rapid advancement, placing pressure on authorities to keep up and ensure comprehensive regulations are maintained.
• - Ultimately, it is up to the consumer to conduct their own necessary research and fulfil their due diligence to be safe in the market.

The insolvency and crash of Three Arrows Capital (3AC) sent shockwaves throughout the crypto community, fracturing prices and seeding even greater doubt within a community that was already reeling from the collapse of the Terra Luna ecosystem.

Indeed, the Monetary Authority of Singapore (MAS) made it a point to make known their hard stance against the billion-dollar hedge fund, highlighting the misleading statements it had made to MAS, amongst a host of other non-compliance transgressions that the regulating institution spared no expense to make public in comprehensive detail last month. Yet the liquidation and downfall of 3AC did more than incur the wrath of both authorities and members of the crypto community alike – it also underscored the indisputable risk and volatility associated with the crypto market as a whole.

Forged in the fires of innovation, enterprise and creativity, the crypto industry is a hotbed for novel projects that boast unprecedented ideas and visions. With the likes of multi-crypto wallets, e-sports 3.0 tournaments, and smart contracts, the crypto industry is fast becoming as fantastic as it is unpredictable.

This however, is what has kept authorities constantly on their toes, wary of the unexpected and constantly doubting the viability of existing solutions and regulations.

Famously coined as the “Wild West” of the greater financial world by United States Securities and Exchange Commission (SEC) chairman Gary Gensler, the debate between safety and innovation is certainly one that is far from its conclusion in the crypto world. Certainly, creativity is needed to cement the growth and future evolution of the sector, but as 3AC’s liquidation clearly shows, some degree of control still has to exist.

As Hayden Hughes, the Chief Executive Officer of Alpha Impact, a prominent social trading platform, tells this reporter:

“The Payment Services Act is a really innovative piece of legislation... It is a piece of legislation that is continuously evolving and changing over time,” he says.

“I would much rather have a set of rules to play by, even if they’re tougher, rather than have counterparties blowing up the entire industry because of excessive leverage”.

The Payment Services Act has undergone five different amendments alongside an insertion of an entirely new section ever since its passing in 2020, something rarely observed in newly-implemented bills.

Indeed, so rapid is the evolution of the sector that authorities all over the world seem to be adopting the stance of harder regulations to stray on the side of caution and stay ahead of the curve. MAS recently concluded the final testing phase of Project Ubin, a research campaign designed to conduct practical experimentation on blockchain technology and understand how it may be applied to payments and settlements in a safe and secure manner.

Hughes is not alone in this too – speaking to Coinlive, Manoj Vembu, Managing Director of Rubix Network, a leading web3 support platform, equally supports the implementation of tighter regulations.

“I am a great supporter of bureaucracy and structure,” he tells me. “Singapore is taking a more economic approach, and making compliance more stringent so that the real players, the one with legitimacy and real economic value, can remain while the bad players are weeded out”.

While somewhat scathing, Manoj makes a good case for regulations as a necessary filter, or safety-net. The benefits of regulations seem promising – market stability and maintaining the levels of investor confidence.

With greater capital inflow through an increase in investors, this could potentially encourage more startups, venture branches and seeding in the crypto space, hence spurring innovation further. Yet if regulations were truly the end goal, surely just staying ahead of the curve is likely to be the optimal cookie-cutter solution would conclude the debate? As this reporter soon learns, there remains more than meets the eye.

Coinlive’s interview with Manoj Vembu, Managing Director of Rubix Network

Regulations and crypto trading: ideological opposites?

The truth is, the crypto world operates on a fundamental mantra: decentralization. Wresting power and control away from state actors and reinstating unadulterated agency into the hands of the community.

This is a world where individuals and businesses alike are able to enjoy unprecedented ownership and free ease of access to their assets, and trade with others without the interference of third parties.

It is through this principle of decentralisation where creativity best flows – where users are empowered to embark upon innovative ideals with the assurance that the reward for their work is kept beyond the reach of governing bodies.

Where technology in the field is constantly evolving to be intentionally steered away from centralisation and authoritative influence, the crypto industry is uniquely opposed to regulations on a basic, ideological level.

Dating even prior to the conceptualisation of web3, the vision for future advancement in the industry can be briefly condensed as “scalable decentralisation”. Yet the community’s suspicion towards regulations is not merely from an ideological standpoint – they are backed by real and tangible reasons as well.

To share some insights on this, I spoke to Andy Koh, Chief Executive Officer of GEMS, a web3 gaming platform.

“The problem with competitive E-Sports right now is prize distribution,” Andy tells me. “Every country in South-East Asia is regulated by banks and state institutions. As a result, some countries do not allow winners of these tournaments to receive the full sum of prize money.”

As an alternative, Andy proposes blockchain technology as a solution to cover these lapses.

“You can, with the help of blockchain with two components: a digital wallet and a digital wallet address,” he says. “With these, any company can host an E-Sports event and transfer the (entirety) of the prize money to the winners”.

Indeed, most E-Sports champions do not get to take home all of the prize money that they win – a significant sum gets absorbed either through taxes, or pay cuts from the managing companies these players belong to.

Although it is unclear if the latter would cease to exist even under Andy’s proposal, Blockchain technology certainly may help facilitate a more direct transfer of winnings to players while ensuring firm ownership of their hard-earned prize.

Safety for all: a compromise?

Herein lies the dilemma – implementing stringent regulations to ensure the safety of users in the sector and risk stifling innovation, or adopt a more relaxed approach and potentially exposing vulnerable users to economic ruin.

Perhaps the solution lies in a compromise between both. As Yuen Wong, Chief Executive Officer of LABS, a real-estate investment firm offering fractionalized property ownership tells me:

“The job of the government is always to strike a good balance,” he advises. “You don’t want to kill innovation, but at the same time you want to make sure malicious projects are (kept) at bay.”

“We still need to be careful, because ultimately it is still our own money. So, look at their team, look at their vision, study their traction, before you step into the sector,” Yuen notes gravely.

As cliché as it may sound, Yuen is right in advocating for a balance of both worlds. Yet striking such a balance demands dedicated communication and unwavering rapport between the crypto community and the governing body.

Holding ourselves accountable

Within an environment that is constantly evolving and changing, this may likely be harder to achieve than it sounds. While governments are increasingly starting to accept the world of crypto as a permanent entity within the nation’s ecosystem, take-up amongst the wider population is still relatively slow.

The campaign for practical, daily use for cryptocurrency is perhaps progressing even slower. Yet progress is undeniable, with companies such as AlchemyPay rapidly investing in ramp projects to make crypto payment methods increasingly accessible to the general population.

However, to expect a situation of full acceptance by the government, and absolute transparency with a fixed roadmap from the crypto community, would perhaps be asking too much at this nascent phase.

Where the former seeks to control and govern, the latter thrives on unpredictability and individual autonomy – an endless game of cat and mouse. But what we may potentially have the greatest agency over, however, would be our own individual safety and security.

As Yuen suggests, due diligence has to be exercised at all times and research ought to be done before dipping ourselves into the deep end. Caveat emptor, always.

This is an Op-ed article. The opinions expressed in this article are the author’s own. Readers should take the utmost precaution before making decisions in the crypto market. Coinlive is not responsible or liable for any content, accuracy or quality within the article or for any damage or loss to be caused by and in connection to it.

Written by: [Coinlive} Darren