Cesar Milan, aka "The Dog Whisperer," is adamant that dogs need boundaries. They seek out discipline and wish for direction. They require an alpha presence to thrive and truly be happy. Dogs require a leash to hold them back at times. Dogs require a kennel to keep them from destroying their universe.
I wouldn't be the first to say crypto is a dog, but I'm using that expression favorably. Boundaries, let's call them regulations, foster focus, provide protection and drive growth.
✅ Regulations help rally forces toward a common goal and stay on the path.
✅ Regulations help weed out nefarious actors and reduce the chances of a nasty bite.
✅ Regulations develop confidence in your target audience as they're less concerned about getting duped, as a higher authority can reign down terror on shysters.
There's much good in setting parameters, which is hard to deny. Look at software development or almost any production process. There are parameters. Quantifiable goals (OKRs (gag)) that keep you in your lane. Sure, these are self-imposed, but we can go beyond that.
Look at FIFA. Would global football have grown to such a phenomenon without a governing body? Look at air traffic. Could you imagine flying around the world if no regulations were maintaining airplanes' security and traffic flow? Makes ya think a bit, doesn't it?
Some countries have put down tracks for crypto regulation, and the U.S. has a bit, but regulatory clarity is still a long way off. We don't even know who will own crypto regulation. Will it be the SEC? As a collective, they have varying reads on the pivotal Howey test, so that could be a nightmare. The SEC must clarify or replace Howey and their beloved “is it a security” test before they can stake a claim. Does it matter if crypto is a security? To those outside of Washington, it does not. Regulatory labels don’t carry much weight among degens. Should it be the CFTC? At least some crypto has been labeled commodities, so there's an argument. I'm not making a case for anyone... give us someone. Will U.S. regulation come in the form of a hybrid approach? Possibly.
I’ve done a tour of duty managing a broker-dealer as Principal and Chief Compliance Officer. Most of my regulatory duties involved interaction with FINRA and not the SEC. FINRA is a Self-Regulatory Organization (SRO). FINRA acts as a “big brother.” There to protect investors but also to assist and protect brokers. They’re a layer of regulation and assistance that keeps you from dealing with “the man,” AKA the SEC. It worked well. Interactions were cordial, and we got stuff done. Brokers reported to FINRA and FINRA reported to the SEC. It may sound like just another layer of red tape, but when dealing with complicated and highly sensitive material, more eyes can be better than less.
Thus far, Crypto’s failure to at least create that FINRA level of self-regulation is part of the problem. Everyone’s off doing their own thing, and there’s not enough common passion. Folks like to say how well crypto companies get along. Interoperability and all that jazz, but is that the case? Are we building common solutions that help all or building independent protocols and then sticking them together?
There's been a vibe over the last several months that it is coming together. We’re building solutions collectively, and crypto should see some big leaps as these collective projects come together in the coming months. Is it all sustainable without regulatory commonality? Without it, what’s now bumps in the road will likely become boulders and may lead to rockslides that indefinitely close the path.
Whatever type of regulatory presence emerges, it’ll leave a mark and likely with a heavy hand. Bruising will run deep, but it’ll just be a flesh wound. Crypto, and more precisely, blockchain, won’t die. There’s too much momentum and good coming out of the space. A lot of development outside of the crypto “currency” realm, and that’s going to benefit a lot of industries going forward.
There’s a lot of debate around what will drive the next rally in bitcoin. We’ve bounced well over the last few months, but we will need another driver to sustain upward momentum. There’s an overhang from past discrepancies and name failures, and many think we need rate cuts to break USD and bolster BTC. That could be true. I’m betting regulatory clarity is the next driver. Institutions must know they’re safe to dive in deeper and invest with both hands. Institutions are in there now, but it’s just tiny segment of institutions that has crossed over to the crypto side. The rest will continue to play it safe until they know the rugs are firmly in place and regulators will not crash the party.
We need Washington to throw crypto (dogs) a bone. Feed the beat with some regulation to chew on, rip apart, and innovate. It’ll happen, and this year is the year.