© Stephen Lovekin/Shutterstock From left to right: Sydney Powell, CEO of Maple, Salman Banai, Head of Policy at Uniswap Labs, Nathan Cha, Head of Marketing at DYDX and Camilla Russo. (Shutterstock/CoinDesk)Join the most important conversations in cryptocurrency and web3! Book your place today
One of the problems when an industry grows is that it is difficult to know if everyone is using the same language. Nowhere is this more evident than in conversations between decentralized finance (DeFi) developers and financial regulators. Can linguistic understanding be found in a treaty? This seems impossible.
Financial regulators in the US (and primarily an international body that is an arm of the US Treasury Department) agree that cryptocurrencies clearly fit within existing regulatory frameworks. Crypto rules can be written.
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Therefore, according to Gary Gensler, the chairman of the US Securities and Exchange Commission, there are conditions for crypto traders to "join and register" with the authorities and FinCEN, which supports strict KYC / AML requirements for all cryptocurrencies.
With the exception of cryptocurrencies, they are widely advertised as square brackets that don't fit into the round hole known as the Howey test (the guidelines the SEC uses to determine whether something is a security, essentially "testing whether public investments expect returns".
That's one of the more pressing points the founder and CEO of the Digital Chamber of Commerce made to Perrian Boring during Wednesday's keynote at Communication. The terms "community" and "collaboration" are widely used in cryptocurrencies and mean one thing to insiders and another to regulators.
"What does it mean to work together?" he asked politely. The answer is that it doesn't matter to the SEC; When a group of people succeeds in building a potentially useful system, it "compromises our rules at work," he said. At least on stage, Boring said he wasn't sure these different interpretations could be explained rather than compromise or comment on the proposed guidelines.
But all is not lost for cryptocurrencies in the U.S. Supporters continued at a panel discussion between Uniswap Chief Legal Officer Salman Banai, DIDX Marketing Director Nathan Cha, Maple Financial Founder Sidney Powell and Jamie Russo. Defiant decentralized finance regulators will take over and achieve the DeFi designation.
DeFi regulators and advocates are on the same page. Both require greater transparency in the financial system (which does not necessarily mean that non-custodial and unauthorized applications will eventually be added to KYC processes). What regulators are trying to do with the written word instead, DeFi can do through code.
You've heard the argument before. DeFi provides real-time auditing capabilities, immutable transaction logs, and the ability to easily track users. As expected, the public may not immediately know the identity of DeFi users, but with time and resources, this information may be discovered by the work of financial regulators.
Also Read: Christine Smith Sees 'Bright' Outlook for US Cryptocurrency Policy
This is not just marketing talk, Banaei statistics are ready. According to the FATF, the seizure rate of illicit funds in the traditional financial system is around 0.1%, meaning that regulators seize one in thousands of funds used in criminal activities. Cryptocurrency Epidemic Rate According to Banai: 27%.
This is not to say that cryptocurrencies are financial criminals. Only a small number of cryptocurrency transactions can be linked to criminal activity, at least according to analyst firm Chinalysis. This means that if a government is concerned about terrorist financing or money laundering, it may need to prioritize cryptocurrency transparency like never before.
It turns out that cryptocurrencies and their regulators speak the same language.