Crypto task forces push for adoption

While the cryptocurrency industry may still be seen as the ‘Wild West’ by some governments and regulators, continued adoption and emergin...

While the cryptocurrency industry may still be seen as the ‘Wild West’ by some governments and regulators, continued adoption and emerging use cases show that digital currencies are here to stay. Some even argue that blockchain-based networks and decentralized finance platforms, or DeFi, could soon replace traditional financial systems.

Yet, despite the progress being made, the crypto industry is still young and therefore needs to be developed further before it can be widely accepted. One area in particular that requires more in-depth addressing within the crypto space is regulation.

Mohamed El-Erian, chief economic adviser at Allianz – a German multinational financial services company – said in a Financial Times article that it is the duty of crypto supporters to cultivate better relationships with regulatory stakeholders, given the disruptive nature of new technology.

Fortunately, some in the crypto community understand that relationships with regulators, policymakers, and the public sector are necessary to drive adoption. As a result, working groups focused on developing standards for the blockchain space are beginning to emerge.

Working groups drive innovation for adoption

For example, leaders in the cash-to-crypto industry recently announced the formation of the Cryptocurrency Compliance Cooperative, or CCC. Founded by Bitcoin ATM operators DigitalMint and Coinsource, as well as blockchain analytics platform Chainalysis, CCC is a collaborative association that aims to develop compliance standards to legitimize the Bitcoin ATM industry to United States.

This is particularly important given that nearly 48 cryptocurrency ATMs are installed per day in the USA. While impressive, industry participants have already noticed that in countries like Canada, Know Your Customer compliance for crypto ATMs has only recently been implemented.

Bo Oney, executive vice president of operations and head of compliance at Coinsource, told Cointelegraph that while there has been exponential growth and maturity in the cash-to-crypto industry – especially with Bitcoin ATMs in the United States – there is still a lack of Anti-Money Laundering Process between companies. Many of these operators also lack financial crime prevention services. As such, Oney explained that the CCC was formed to fight against fraud and cases of malicious use:

“The best way to overcome the challenges faced by the cash-to-crypto industry is to go through this cooperative. We plan to publish logical and responsible standards that adequately address the concerns we see and then share them with our industry. We hope that they will be widely adopted by all companies in this sector and that we can define future regulations.

While developing standards for the cash-to-crypto industry is the primary goal of the CCC, it is important to stress the collaborative nature of the association. Marc Grens, co-founder and president of DigitalMint, told Cointelegraph that CCC hopes to bring together some of the best minds in the industry. Grens noted that this will ultimately allow the major players in the space to join forces to set the standards for a steadily growing and often misunderstood industry.

Grens pointed out that there wasn’t much of an impact when FINCEN’s Financial Crimes Enforcement Network came out with official guidelines in 2013. saying that cryptocurrency exchanges and money issuers must act as money service businesses under banking secrecy law:

“These tips are like putting a square peg in a round hole. Regulators didn’t know much about cryptocurrency at the time, and basically took that act and pushed this industry into it. These people do not watch what is really going on behind closed doors. “

As Grens explained, the cash-to-cryptocurrency industry learned early on that organizations need to come together to provide objective, data-based facts about fraudulent activity taking place in space. : “The current monetary services law is not sufficient to combat illicit activities. “

Oney further hopes that the CCC will become a milestone for the crypto ecosystem, as different players from an emerging and increasingly competitive space join forces to develop standards for the betterment of an industry: “We don’t need government involvement to set standards. “

While it may be, Oney shared that the CCC has a close relationship with members of the U.S. law enforcement, including those involved with the Federal Bureau of Investigation, the Department of Homeland Security, and local and state agencies. “We want to educate and communicate to these people what the standards should be. They can then implement the policies.

CCC is just one example of a collaborative association working to define industry standards for cryptocurrency to be adopted by regulators. Hailey Lennon, a partner at Anderson Kill law firm, told Cointelegraph that various professional associations have grown in recent years. She mentioned that some of them understand the Blockchain Association, Virtual Commodity Association and Crypto Council for Innovation.

According to Lennon, it makes sense for crypto and blockchain companies to want to be part of working groups and professional associations to help educate regulators, especially with all the different state and federal regulations floating around in space: ” Regulation stifles innovation; carefully designed regulations do less harm.

This certainly appears to be the case for the mature cryptocurrency industry. For example, Chen Arad, COO of Solidus Labs – a risk monitoring platform for digital assets – told Cointelegraph that collaborative groups that share data and cross-market surveillance are key to responding. to Bitcoin (BTC) in the long term question about exchange traded funds (ETFs). He noticed :

“The lack of shared oversight agreements in crypto is the main reason the SEC rejected Bitcoin-ETF rule change requests. The SEC wants to know if traders are manipulating Bitcoin on more than one exchange. Surveillance in this regard requires data sharing agreements that would allow cross-market surveillance. “

Arad added that outside of the crypto sector, there have been many examples of industry-driven self-regulation that have allowed new technologies to solve regulatory problems and thrive. “The Lending Online Lending Network and Securities Cross-Market Watch Group were created by these industries to solve very similar cross-platform issues. ”

Will the working groups have an impact?

Lennon pointed out that many of the cryptocurrency task forces and collaborative associations mentioned are currently not recognized as formal self-regulatory organizations, or SROs. In turn, Lennon explained that it can be difficult for regulators to work with these groups:

“An SRO typically receives legislative authority from a regulatory body that enables it to create policies and enforce them in a specific industry. For example, FINRA is an SRO for the United States Securities and Exchange Commission. Currently, none of the organizations mentioned here have the legislative authority to function as SROs and therefore they are more of professional associations or working groups that provide suggestions on the impact of regulations on space.

Lennon explained that these groups are indeed useful but do not have the same authority as SROs. Echoing that sentiment, Zachary Kelman, Managing Partner of Kelman PLLC and General Counsel of Cointelegraph, believes it helps to have a body that develops standards, but the federal government generally reviews traditional industry standards. : “The federal government has a program. They run money services businesses and want them to comply with certain laws.

Despite this, Kelman pointed out that it might be easier for cryptocurrency task forces to approach state regulators regarding standards, noting that this is the case especially since many US states, like Florida, are now trying to become crypto havens:

“It may be possible to have a standard for state-level cryptocurrency ATMs as an educational tool for state regulators. If these standards are fairly consistent across the industry, it could be helpful in coordinating efforts across the country. “

While this makes sense, Lennon noted that another challenge is the growing number of workgroups within the crypto space. In particular, Lennon is concerned that with so many task forces there are overlapping goals and potentially conflicting messages: “In a perfect world, there would be a collaboration or merger between several of these. groups to bring more cohesion to the industry. ”