Yesterday, Forbes published a long post by Hailey Lennon on the relationship between governments, institutions, regulations and digital assets.
Lennon is currently a legal counsel for a number of crypto and fintech companies and has previously served as Regulatory Counsel for crypto companies such as Coinbase, bitFlyer and Silvergate Bank, and as Secretary of the Virtual Commodity Association.
Summary
The future of cryptocurrencies resembling the internet
In the post, Lennon wonders what the future of private currencies in the US and internationally might look like, stating that many argue it could be similar to the way HTTPS has been in the past, and the way the government eventually simply accepted web users’ desire for privacy and encryption.
It is worth remembering that HTTP, the original unencrypted protocol, was developed within a sphere very close to US institutions, while HTTPS was developed in the commercial sphere precisely to encrypt online communications and make them obscure and untraceable.
Privacy issues
He suggests that companies should continue to engage in privacy coin discussions with regulators to eliminate misconceptions and responsibly highlight the value of privacy in the financial sector. But he makes no secret of the fact that these issues are unlikely to be resolved any time soon.
He considers the crypto industry’s engagement with regulators to be very important because it would allow the industry to show regulators that privacy coins are not all that harmful when it comes to money laundering or terrorist financing.
He also reveals that regulators are often understaffed, and therefore do not focus on long-term developments, preferring instead to concentrate on the problems they have in front of them at the moment.
Government focus on digital assets
The key point of the argument is precisely the increased focus of governments and regulators on restrictions on the privacy of crypto users, in an attempt to maintain some control over the sector.
Lennon writes:
“In light of the pace of innovation, especially in the cryptocurrency space, where privacy is often mandatory, these distractions are likely to keep them playing catch up and perhaps on the wrong side of history”.
The problem of privacy in the crypto sector is clearly there, even if many cryptocurrency users deny it or pretend not to see it. It is not a technical or technological problem but to all intents and purposes a political problem, which should by no means be underestimated just because it does not stem from technical, technological or financial issues.
However, it is indeed possible that, in the long run, governments will be faced with a fait accompli and will have no choice but to accept that cryptocurrency users want a high level of privacy. Should these users be a significant portion of the population, democratic governments could easily find themselves unable to act without losing support, and could therefore simply take note of the situation.
In such a scenario, the crypto industry’s collaboration with regulators becomes crucial in order to arrive as soon as possible at some sort of compromise, or balance, whereby the current regulatory uncertainty can cease to hinder their development and diffusion.
