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The crypto “Wild West” may need a good sheriff (FT View, August 14), but it also urgently needs to learn how to deal with such authorities.
Unfortunately, many players in the crypto space are only now realizing that policy makers in Washington and around the world will play a critical role in their future. Like it or not, government relations should have been a central part of the crypto industry’s business strategy from the start – and now they are trying to catch up.
As much as some members of the crypto community would like this technology to exist entirely outside of the existing financial system, it cannot. The disruption that the original, fully decentralized model is supposed to cause will simply not be allowed by the regulators, whose job it is to ensure orderly and stable market conditions. The future of finance is not completely decentralized or completely centralized; it’s hybrid.
It shouldn’t have come under the perceived threat of a proposal that would empower federal regulators to impose new tax reporting requirements on cryptocurrency brokers in order to force the crypto community to work with the U.S. government.
Government relations are about building trusting, bilateral relationships. As the saying goes, you never want your first phone call to a legislature when you have to ask a favor.
When these important relationships are forged, events like the recent development of the bipartisan infrastructure proposal will not surprise the industry.
Ultimately, real change in financial markets is driven by collaboration. The global financial system has evolved slowly over millennia, and improvements in the flow of money and assets have almost always been achieved through the successful integration of new technology into the infrastructure and institutions within it.
The idea that this system can be completely dismantled and replaced by crypto models has always been greatly exaggerated. Last week’s events must serve as a wake-up call to this community that refusing to join the regulatory debate could ultimately be the death knell for the entire crypto industry.
Managing Director, R3
Former Chief Operating Officer, Commodity Futures Trading Commission, New York, NY, USA