Sunday, September 24, 2023 | 2 am
The now-bankrupt FTX pulled off massive fraud because it took advantage of the lack of rules in the uncharted territory of cryptocurrencies, not because the cryptocurrency industry itself is fraudulent. Continued lack of regulation will not prevent fraud; it will only continue to empower bad actors to operate in the shadows while stifling innovation.
In an era marked by rapid technological advances, cryptocurrencies stand as a revolutionary force driving ingenuity and transformation across the global economy. Recent surveys show that voters and cryptocurrency investors are dissatisfied with the current state of the financial system and are clamoring for change. A whopping 80% of American adults believe the current financial system favors those with โpowerful interests,โ according to a survey by business intelligence firm Morning Consult.
Many consumers are also increasingly wary of traditional banking systems after issues such as Bank of America being fined $100 million for illegally freezing people's accounts with a flawed fraud detection program. That's why the expanding world of digital currencies offers a tantalizing vision of a future where financial freedom is no longer an elusive ideal.
Digital money has the potential to transform the financial sector. Emerging markets and low-income countries will benefit the most from this dramatic shift, according to two researchers at the International Monetary Fund.
However, for this potential to be fully realized, policymakers must embark on a journey of understanding and collaboration to harness the power of blockchain and cryptocurrencies responsibly. The Federal Reserve found that 22% of adults in the United States are unbanked or underbanked. This equates to approximately 63 million Americans who either do not have a bank account at all or rely on โalternative financial services productsโ such as money orders, check cashing services or payday loans to meet their financial needs. By providing individuals with direct control over their financial assets and reducing the need for intermediaries, cryptocurrencies can democratize access to financial services, says the World Economic Forum.
Investors are quickly recognizing this transformative potential of cryptocurrencies and open-book blockchain technology. These technologies have already had countless cutting-edge applications, from offering lending and borrowing without traditional banks through decentralized financial platforms, to revolutionizing ownership in the digital art and collectibles space with non-fungible tokens (NFTs). As venture capital enters the cryptosphere, it is imperative that policymakers listen to the voices of their constituents to foster an environment that encourages growth, entrepreneurship, and responsible risk-taking.
However, the path to realizing the full potential of cryptocurrencies is not without challenges. A key obstacle is the lack of comprehensive understanding among policymakers about the complexities of blockchain and digital currencies. This knowledge gap often translates into fear of the unknown: hindering actions needed to protect consumers or efforts to stifle the industry as a whole. But preventing legitimate players from growing leaves loopholes that bad actors like FTX can exploit. This is why it is so important to have a healthy cryptocurrency infrastructure. To truly safeguard everyday customers and investors, while fostering innovation, requires a commitment from policymakers to collaborate with experts and innovators to create a strong protection framework.
Regulation, when applied correctly, can serve as a catalyst for growth. You can establish clear rules that encourage responsible behavior, prevent financial crime, and safeguard consumer protection.
Just as policymakers must understand the nuances of blockchain and cryptocurrencies, the industry must make concerted efforts to educate the public and policymakers about the clear use cases, benefits, and risks they see. Only through open dialogue can misconceptions be dispelled and a shared vision for the future forged.
The rise of cryptocurrencies heralds a new dawn for innovation and progress in our financial landscape, but voters and investors are right to call for reform. A prosperous future requires a balanced approach, one where policymakers, industry experts, and investors come together to build a robust cryptocurrency infrastructure. By embracing education, understanding and collaboration, we can ensure that the promise of cryptocurrency becomes a reality, fostering financial and banking systems that empower people, fuel ingenuity and usher in an era of inclusive prosperity.
Rudy Pamintuan is a cryptocurrency investor who serves as chief of staff to Nevada Lieutenant Governor Stavros Anthony. Pamintuan previously served as an advisor to President George W. Bush and as managing director of Sherman Worldwide.
