On October 20, crypto billionaire Sam Bankman-Fried (SBF) gave his opinion on what he believes is necessary for effective crypto regulations. A draft proposal for a set of industry standards is contained in the lengthy document published on the FTX Policy website.
They could be put in place to create clarity and protect customers while we wait for entire federal regulatory regimes, according to the report. Regulations for cryptocurrency and stablecoins are not expected to be finalized until the first half of next year.
Rep. Jim Himes hinted at this earlier this week, saying, "It's probably not going to happen in early 2023."
Crypto guidelines are being considered
SBF believes that there should be "blocklists" for illicit financial activities rather than "allowlists." He stated that reliable lists of illicit addresses are required, but peer-to-peer transactions ought to be free as long as no sanctioned entities are involved.
A method for minimizing the consequences of hacks and security problems is also required, but this is difficult. He also stated that public disclosures and asset transparency should be worked on.
SBF conceded that decentralized finance was difficult: "To be honest, this is one of the most difficult areas to master. The most important thing is that we do not rush into anything: that industry, regulators, and legislators work together cooperatively and thoughtfully."
He also stated that retail-facing platforms and advertising should include customer protection. Stablecoins also require regulatory oversight and up-to-date public info and audits to verify that dollar-backed stablecoins are, in fact, backed by the dollar.
The majority of the suggestions were utterly acceptable. However, there were a few that the crypto community objected to.
The community responds
The very first point of disagreement was that DeFi should abide by the Office of Foreign Assets Control. OFAC is a govt agency in the United States. The Treasury Department is in charge of administering and enforcing economic penalties based on US foreign policy. RSA also strongly opposed the suggestion that DeFi front-ends be registered as brokers or dealers.
Both premises eliminate the decentralized component of DeFi, reverting to CeFi/TradFi. Another point of contention was the suggestion that, in the event of an exploit or dispute, freezing chains become the norm. According to the document, "this would eliminate the United States from the crypto race."
Frax Finance founder Sam Kazemian asked why only fiat-backed stablecoins should be recognized when collateralized stablecoins such as DAI, FRAX, and GHO are available.
Another respondent summed up the proposals the best: "So your answer to the very real and difficult questions of how to properly regulate a technology that has the potential to revolutionize the financial system is to... incorporate it into the existing system?"
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