Defining A Crypto Friendly Regulation
The DeFI Space has been created to build an open decentralized world where everyone can innovate and create. Innovation in any shape or form can be used in a positive way but also in plenty of adverse ways and that is why an oversight or some sort of regulation is always necessary. These regulations then should also be friendly enough to nurture the growth of the DeFI Space while preventing any irregularities that may happen. So let us dive in on the concept of creating a Crypto Friendly Regulations and its developments over the years.
How to Create a Friendly Regulation?
If we hop into a time machine and revisit the early 2010s, nobody would expect Bitcoin would go on to an unprecedented rise and build this vast new world of the DeFI Space into a reality. Everybody thought that it would never be more than worthless coin but it would prove to be the best performing asset throughout the decade and outperforming many major indexes that have centuries in existence within the traditional markets.
Its achievement also has attracted plenty of excitement from the community and its user count continues to grow even in the uncertain economic conditions. Its user base over the last decade has even outperformed the other greatest inventions of the century such as the internet and social media which further solidify its remarkable legacy. This has prompted many enthusiasts to innovate and create better DeFI Projects that will attract more adoption within the space.
This excitement obviously hasn’t gone unnoticed by the external world as plenty of adoption from institutions and even the government starts to flood into the DeFI Space. We can look towards the adoption of Bitcoin as a legal tender in El Salvador and the recent Spot ETF approval as some of the highlight achievements of the DeFI Space. These should probably be a catalyst for more external adoption of the DeFI Space within the years to come.
Obviously just like every innovation that has existed, the DeFI Space also has plenty of shortcomings that have happened throughout this journey. For every revolutionary digital asset such as Bitcoin and Ethereum, there are plenty of Celcius and Terra Luna which cause massive losses during its collapse. 2022 was clearly a learning year for the DeFI Space as it faced three of those massive collapses that could spell the end but the community managed to hold on.
The Space clearly achieved its objective of revolutionizing the financial industry and maximizing the potential of blockchain technology but it clearly still had a lot of maturing to do. With time every invention will have its lows and that is why it needs oversight to make sure that the growth can be sustained for the long term. It needs proper regulation to make sure that enthusiasts can continue to participate in the DeFI Space without worry of another major collapse happening.
Throughout the years, this topic of DeFI regulation has also been a very discussed one with many nations offering their own perspectives. There are nations such as China which stands to abolish Digital Asset in favor of CBDC while there are other nations such as Brazil, UAE, and South Korea which aim to regulate space. Perception towards the space has not only been divided but also slowly drifted to the regulation side as we enter the 2020s.
This change of perspective was all thanks to the massive potential and opportunity that the DeFI Space may bring to the nations who embrace it. We see developing nations such as Kazakhstan rise to be a leader in the Bitcoin mining space and Vietnam leading in the amount of digital asset adoption within the Asia region. We can also see the UAE growing in prominence as a hub for institutions within the DeFI Space due to its crypto-friendly regulations.
This is obviously the key to creating a regulation for the DeFI Space that regulators should focus on nurturing the enormous potential of the space while deterring any irregularities. It should be friendly enough that any small aspiring projects can adhere while also avoiding any giants within the industry to monopolize and use it to their advantage. Regulations should be built with clarity and transparency for every stakeholder to attend to while not constricting the growth of the space over the long term.
2024 is a new page in the regulation discussion and with the DeFI Space on an upward trajectory, it’s a great chance to prevent another 2022 from happening again. These Regulations should not only encompass the exchange platform but also provide oversight on the DeFI project and institutions to provide more transparency for the users to choose the right project amongst the thousands available. In the end, these regulations should be able to be educated to everyone so they can grasp and adhere to them.
These discussions about crypto-friendly regulation will continue as long as the developed nations such as the U.S. and China are still missing. With many regions stepping in to take the lead on defining DeFI regulations such as Asia and the EU, many lessons can be learned and implemented for the U.S. in its DeFI regulation. As prediction and growth for 2024 exceeded its expectations, let’s see if the regulation can catch up with the development!
Regulations that are Friendly but Not Easy
The word “Crypto Friendly Regulation” occurs frequently during its peak in 2021 but somehow it is always misunderstood by enthusiasts. Everybody wants a friendly regulation but it doesn’t mean that the regulation ignores its purpose in place of pleasing the community. Regulations should be friendly enough to nurture the growth but definitely not easy enough for anyone to exploit to its own advantage and finding the balance is always going to be a challenging task.
The case of FTX once again proves that the Friendly Regulation deployed by the Carribean might not be the best solution as not much oversight was done to the operational of the Institution which therefore is exploited. This should remind us that the purpose of the regulation is to prevent any irregularities from happening and secure the trust of the community that is the bedrock of the DeFI Space upon which this regulation failed to achieve.
Contrast that to the regulations deployed by the Monetary Authority of Singapore (MAS) which are amongst the earliest to come up with a Regulation for the DeFI Space or the new MICA Regulation deployed by the EU in late 2023 and you will find stark differences. They both can be considered crypto-friendly regulations that will nurture the growth of the DeFI Space but are certainly tough enough to deter any irregularities from happening
The DeFI Space certainly comes with bucket loads of potential and a community that is willing to support it but also sometimes comes with its strange volatility. This potential also drives the perception of every nation to maximize the potential of the DeFI Space and lead it for the long term as a Crypto-Friendly country but we also need a great regulatory framework to nurture it most sustainably. Regulations will play a key role in the growth of the DeFI Space, we sure hope that the regulatory framework can support this development in the years to come!
We at Nagaya Technologies Pte Ltd. surely believe that a proper regulatory framework could help provide the structure needed for the Crypto Space to operate efficiently. This resonated in our principles which are to provide Legality and Transparency to our holders to promote trust and value. Our vision is this should not only create trust but also value for the stakeholders of our Hybrid Crypto Asset. To learn more about Nagaya Technologies and the world’s first hybrid cryptocurrency, you can read our whitepaper through our website at nagaya.io
Or you can talk to us at t.me/nagayaofficial
