I’d like to take a dive into the deep end and talk about the regulatory shift — no pun intended — that is happening today because Bitcoin has performed exactly as we expected. Institutions are now coming aboard. The momentum we see today is more justified than that of 2017’s, during the days of the ICOs. Today’s momentum is here to stay, and that’s exciting. That’s why there is a regulatory shift happening.
The ecosystem has started to understand the implications of the ongoing regulatory shift. That fact that crypto doesn’t fit into the regulatory box is the problem. Bitcoin doesn’t operate in the same context as traditional finance. The space must figure out how to merge these two, disparate worlds together and create a bridge.
There will be an intersection at which blockchain and traditional finance meet, and we’re at that Goldilocks moment now. In the children’s story, she tastes three different porridges and finds that she prefers the porridge which is neither too hot nor too cold, but just the right temperature. The question is, What is “just the right amount” of regulation when it comes to blockchain?
From 2010–2016, there was an impression given that the crypto ecosystem was untouchable, invincible, censorship resistance, and much more. The whole Honey Badger sentiment, which states that Bitcoin will progress no matter what had a few flaws. For one, Bitcoin doesn’t care what anyone thinks. Bitcoin itself is censorship resistant, but its users are not honey badgers, we are bound and influenced by the policies and regulations that shape the societies we live in, and if we don’t get that right, we as a society lose in our ability to utilize at scale what bitcoin and our industry fixes and enables.
I had a very deep conviction that the traditional world could make impactful and negative changes to our ecosystem, and influence the future of blockchain. In 2017, there were no early crypto OGs working on the regulatory challenge, ensuring it progresses the right way.
Over the next several years, the ecosystem continued to grow, causing the regulatory landscape too swiftly become the main battleground for blockchain. We must work with international organizations to educate them and drive the ecosystem into the light.
While lobbying on behalf of the industry, I began in 2016 to look at the problem from a technical perspective. I saw the demand for a blockchain identity infrastructure which preserves openness, decentralization, and the privacy of individuals, and began work thereupon.
This work comes with tradeoffs. For instance, full anonymization and privacy of money is a big ask in a world that combats terrorist financing. Whether you like Know Your Customer (KYC) or not, it is a function of how institutions operate, just like they must adhere to securities law, international taxation, and so on. Since KYC is a critical requirement when it comes to open payment systems, you can imagine how the regulations would evolve.
However, our ecosystem doesn’t work the way to which they are accustomed. Their traditional approach to regulation will transform the ecosystem into something barely recognizable. We can avoid that, however, it’s a battle with lots of complexity. There’s plenty to overcome. The challenge requires collaboration amongst the blockchain industry.
Tackling the problem isn’t as attractive as DeFi or NFTs, but this battle has the potential to empower the space to move forward. We need open infrastructure and tools that support the ecosystem and the cointegration.
Written By Joseph Weinberg, Co-Founder, Shyft Network.
About Shyft Network
Shyft Network is a public protocol designed to aggregate and embed trust, validation and discoverability into data stored on public and private ecosystems, and facilitate information transfer between permissioned and permissionless networks. By incentivizing individuals and enterprises to work together, Shyft Network allows for the layering of context on top of data, turning raw data into meaningful information.
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