In the 1800s, people flocked to the West, blinded by the Gold Rush and the opportunity to get rich overnight. In modern times, crypto has become its own wild, wild West, where, in a lawless world, anything is possible. At least that’s how the crypto mythology sounds.
The crypto universe centers around decentralized communities. Crypto development was driven by a passion for empowering users through decentralization and autonomy. However, these were the very same factors that attracted the darker side of users as well. Freedom through anonymity and a lack of regulation, is a perfect recipe for criminal activity, not to speak of the number of scams, which mercilessly claimed the money of unwary investors.
When unleashed, crypto’s potential is enormous, but can it be implemented in a way that does not disrupt the system? How can innovation be nurtured, while also keeping crypto inclusive and fair? The answer lies in the fundamental question: to regulate or not to regulate crypto?
New Regulations Are Coming
Regulations establish order, which means a sector can operate more safely and with predictable outcomes. As in any other industry, crypto regulations would standardize the rules of play and provide a safer environment for investors and users alike.
With the crypto industry booming, regulations are inevitable. One of the most significant regulatory projects, called MiCA (Markets in Crypto-Assets), looks set to be introduced in the EU by 2024.
The European Commission adopted a new Digital Finance Package in 2020, which is primed to transform the European economy in the coming decades. The package aims to improve the competitiveness of the continent’s Fintech sector and technologies, while mitigating risk and ensuring the financial stability of the European economy.
The European Commission declared that they created MiCA to ensure that EU consumers can access innovative, yet safe, crypto-assets without compromising market stability. The protection of crypto users is arguably its primary concern, which has to be balanced against the need to facilitate cutting-edge investment products with regulatory and financial risk.
The Positives of Regulation
Even though regulations bring a degree of clarity into an as of yet unregulated crypto world, there are some concerns that the crypto industry could be negatively impacted by constant change in the regulatory environment.
Regulations may directly affect the innovation and growth of the market, but not everyone is feeling pessimistic about laws in the crypto-verse.
According to him, the crypto space is already entering its maturation phase. Some of the original disruptive players that helped crypto get big are under question and potentially out-regulated.
"The new players can enter the space with new sorts of frameworks. We will get new regulatory frameworks, which add the clarity that is needed for adoption or will add more requirements for some of the existing players, right?"
The IOTA Foundation aims to build a new digital economy by redefining how people and devices connect to share information and value around crypto technologies. By creating a standardized and open-source technology, the foundation highlights trust and transparency in managing the IoT.
IOTA changed the heavily traditional blockchain design and developed a new technological platform called Tangle. Tangle is a distributed ledger technology that is specifically designed to run in an IoT environment.
IOTA strives to become a standard in IoT, so Schiener highlights that regulations and recognition from governments is the key for them to scale and achieve adoption in the real world.
Schiener underlines that big companies feel enthusiastic about adopting crypto technologies, however, they raise the same questions about taxes, standards, transaction fees, and other legal concerns. Schiener truly believes that regulations will bring clarity to all participants and accelerate adoption.
IOTA is already working closely with authorities to create different tech solutions, such as the Gaia-X project in the EU, and working with governments in East Africa to generate paperless trade solutions.
"I think one of the next major phases for us is also more recognition from governments, like we have already seen in Germany and Europe. Even though adoption in the enterprise world takes a lot of time, it's worth it in the end because this is where most of the transaction volume will happen in the future, in my opinion."
Bringing Clarity but Not Regulating out Innovation
The biggest challenge for regulators is how to strike a balance between providing the necessary support for the ecosystem to flourish, without regulating innovation out of the market.
Schiener feels positive about future regulations in the European Union, because they will provide the necessary clarity to the market, such as classification of tokens and taxes, but he makes an important distinction. According to him, the technology involved in crypto itself shouldn’t be regulated, because it would negatively affect innovation.
"We should not say, "Hey, in IOTA, only KYC verified users could participate." Honestly, we should all throw away the project at that point because then it doesn't make sense. The only reason why IOTA makes sense today is that it is permissionless. It is open. Anybody can participate."
Schiener suggests that regulations should instead address the use cases and endpoints with which people enter and exit the crypto ecosystem, instead of regulating technology.
"Since the very beginning, we have always set banks or financial institutions as the gateways into these new crypto economies, and of course, they will be regulated. Some incumbents in the crypto space will get banking licenses that are already happening, so they can be their gateways. So this is where it's really heading towards."
Watch the full interview here: