The crypto industry has come a long way since Bitcoin’s inception in 2009. What started out as a niche movement has now grown into a multibillion-dollar industry that is being embraced by mainstream investors, governments and financial institutions. The rapid growth of the industry has led to increased scrutiny from regulators, who are now grappling with the issue of how to regulate this relatively new financial sector.
Until now, cryptocurrencies have been largely unregulated. This has led to a certain degree of uncertainty and fear among investors who worry about the potential for fraud and market manipulation. While many argue that the decentralized nature of cryptocurrencies makes them more secure than traditional financial systems, it also makes them more vulnerable to attacks from hackers and other malicious actors.
In recent years, some governments have started taking a more proactive approach to regulating cryptocurrencies. In 2017, China banned initial coin offerings (ICOs), while South Korea introduced regulations that require cryptocurrency exchanges to adhere to strict KYC/AML (know your customer/anti-money laundering) rules. The European Union has also proposed a number of measures aimed at regulating cryptocurrencies, including the introduction of a regulatory framework for cryptocurrency exchanges and wallet providers.
While these developments are undoubtedly a step in the right direction, many in the industry argue that more needs to be done. With the rapid growth of the industry, there is a growing need for regulation that can ensure consumer protection, market stability and overall financial security. This is particularly important given the potential for cryptocurrencies to be used for illicit activities such as money laundering and terrorism financing.
One possible solution to this issue is the creation of a regulatory sandbox, which would allow startups to operate within a controlled environment that is overseen by regulators. This approach has been successfully implemented in other sectors, such as fintech, and could be applied to the crypto industry as well.
Another potential solution is the creation of a self-regulatory body made up of industry players. Such a body could develop and enforce industry standards, provide oversight and guidance to startups, and carry out investigations into potential scams and fraudulent activity.
Regardless of the approach taken, it is clear that the future of the crypto industry is closely tied to regulation. Only through a coordinated and collaborative approach that involves industry players, governments and regulators can the true potential of this innovative sector be realized.
Franklin Templeton’s CEO Jenny Johnson believes that the crypto industry needs to accept that more regulations are on the way. Speaking at CoinDesk’s Consensus Festival, Johnson noted that the future of the industry will be regulated, and that cryptocurrencies such as Bitcoin are distractions from the real innovation in the sector, which is blockchain technology. In her opinion, if Bitcoin ever became a threat to the US dollar as the reserve currency, the US government would limit its use since currencies are vital for governments to manage their economies. Johnson believes that it is better for companies to engage directly with regulators as they develop new products.
Franklin Templeton, which manages over $1.5tn in assets, recently launched a blockchain-based mutual fund and had worked closely with the US Securities and Exchange Commission (SEC) as it developed the product. Johnson also highlighted that the company, which has offices in more than 30 countries worldwide, is experienced in working with regulators outside the US. Nonetheless, Johnson acknowledged that different regions worldwide have differing levels of comfort concerning crypto regulations, citing Singapore, Hong Kong, and the UAE as examples of jurisdictions that are more crypto-friendly.
Johnson further stated that regulators both in the US and globally are hesitant about passing regulations that could have unintended consequences. However, she is bullish on the potential for blockchain technology to disrupt the financial industry. She believes that blockchain technology could open up investment opportunities for asset managers by reducing friction and eliminating unnecessary toll takers.
In conclusion, industry players should accept that more regulations are likely to come, including within the crypto market. Companies should engage directly with regulators as they develop new products, and different regions across the world have differing comfort levels concerning crypto regulations. Nonetheless, the potential for blockchain technology to disrupt the financial industry is vast, and companies such as Franklin Templeton see significant investment opportunities in this emerging sector.