One of the biggest draws to the blockchain, cryptocurrency, and NFT industry is the decentralized nature of the industry. There’s no single authority that can set prices, utility, or anything else in the industry, all of these factors are ultimately agreed upon by the masses.
While the idea of a value-based decentralized network is a great one, there have been some issues. Some of the biggest problems are scams that hit unsuspecting blockchain enthusiasts.
Nonetheless, that’s to be expected. Anywhere major value is created, con artists will work to exploit those valuable systems to their own benefit, even if it’s at the detriment of others. Take the stock market for example. In the early days of the United States stock market it was the Wild West.
Scams were prevalent, so prevalent in fact that the fake creation of value led to a stock market crash resulting in the Great Depression. It wasn’t until the United States Securities & Exchange Commission, or SEC, was created that investors had any real, legal protection for the financial assets they traded in.
Coinbase, a leading cryptocurrency exchange that recently announced the coming launch of an NFT marketplace, recently published an appeal for a “digital native” United States regulator that will oversee digital assets.
Wait… Isn’t Decentralized, Unregulated, Community Validated a Good Thing?
There’s no question that the move is a surprising one that leads to a bit of a debate in the digital assets industry. One of the primary draws to the industry is the fact that it’s decentralized and regulated by the community.
After all, values, utility, and more are all agreed on by the community in the blockchain.
Bringing in a single regulator that oversees the digital assets market would change things in a big way. It would bring a central authority to a decentralized industry. Why exactly would Coinbase want to do that?
Well, the fact is that the shift is already taking place, and Coinbase believes it’s happening in the wrong way.
You see, for some time now, the United States SEC has been working to build itself as the regulatory authority of digital assets. However, digital assets and traditional investment products are two different animals.
To that end, Faryar Shirzad, Chief Policy Officer at Coinbase, had the following to offer:
“What we realized fundamentally is that there’s such differences in the technology underlying digital assets. It didn’t make sense to take a legacy regulator and somehow transform it.”
He went on to explain that,
“Ensuring consistent regulation and application of the laws requires a single regulator. Where new policy questions or challenges arise, the ability of a single dedicated regulatory body to respond in an efficient and timely manner benefits everyone.”
Moreover, Shirzad explained that the regulator would have an understanding for what constitutes a regulatable product, pointing to the fact that Bitcoin and Ether would not fall into the purview of the proposed regulator because, “if you have a truly, truly decentralized entity or protocol, there’s nothing to regulate under our proposal.”
What a Massive Statement
The fact is that if we follow the general theory of regulation, as it stands in financial sectors, the decentralized nature of the blockchain will largely fall by the wayside. Coinbase is essentially pointing to the fact that regulation is necessary when companies attempt to create their centralized end of the blockchain.
Moreover, the new regulator would oversee projects, imposing repercussions to bad actors that scam others in the MetaVerse.
What the regulator would not do is attempt to control every bit of the industry, and would not have any say when a project is truly decentralized, that is a democratized platform where users agree on both the value and utility of assets through the blockchain itself.
The Bottom Line
The bottom line here is that for the most part, the blockchain needs to remain a decentralized entity that’s regulated by the community it brings together rather than a single regulatory authority. However, projects that don’t follow along those traditional lines of democratized decentralization should have oversight to avoid loss due to scams. Coinbase is onto something here my friends.