Crypto and regulation: victims of their own success

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In the beginning, the industry was too small to be noticed by the authorities.

(Photo: Unsplash)

Crypto industry players have always had a confrontational relationship with regulators. The crypto founders, investors and programmers wanted to be different, not to be held back by antiquated laws of the old world of finance. They originally came to replace Wall Street.

There are good reasons for this attitude. The tech companies from Silicon Valley have shown the way. It is better to ask for forgiveness than to ask for permission, is the mantra on the West Coast, followed by many crypto entrepreneurs. Only away from the regulators was the crypto world able to grow so quickly and generate returns in the three, four and five-digit percentage range in the good times before the current crisis.

For a long time, founders, programmers and investors got away with this strategy. In the beginning, the industry was too small to be noticed by the authorities. But the crypto world has become a victim of its own success. It has attracted so many retail investors and is so intertwined with traditional finance that regulators can’t look the other way.

Concerns that turbulence among crypto providers could endanger the stability of the financial system extend to the White House. The crypto industry is now taking revenge for not approaching the regulatory authorities early on. They use the scandals of the past few months to take action.

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The sheriffs don’t wait for laws

They don’t wait for laws. They create facts with lawsuits and out-of-court settlements. And so the heads of authorities and prosecutors, who like to portray themselves as “sheriffs of the financial world” in the USA in particular, show that they are more powerful than many had thought.

Neither celebs like Kim Kardashian are spared nor so-called DAOs, decentralized organizations that the crypto world thought could not be regulated. But you can.

The young industry is now faced with a deep division: those who want to survive and grow in the long term need the blessing of the supervisors. There will also be other projects, but they will operate in a gray area and will probably not be able to attract large numbers of users or well-known investors.

This development has been apparent for a long time, but now the signals are unmistakable. Vendors must decide which side they are on.

More: US regulators are taking action: The Kardashian case is causing a stir in the crypto world

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