It is said that cryptocurrencies are becoming too powerful for regulators to ignore. In fact, some countries have already reacted, with a few straight out banning crypto trading, and most just cautioning public about the risk involved in buying these digital assets.
Mind you, it is that risk which is behind many fortunes that were made and are still being made as we speak.
Nonetheless, some folks from the crypto community are looking to act in advance and self-regulate their industry instead of the government coming up with a top-down approach.
One of them is Ryan Selkis, known by his Twitter moniker TwoBitIdiot, who is working on a crypto version of CrunchBase that could evolve into something bigger; something that could help the entire crypto space.
Self-regulating the cryptocurrency market
Selkis thinks self-regulation is the way forward, and he has recently announced a creation of a token that could protect the industry by introducing standards that will add some order to today’s market, which many describe as the Wild West. He wants to make sure that a good idea such as an Initial Coin Offering (ICO) isn’t ruined by bad behavior.
ICOs are especially gaining traction among regulators, with some countries even banning the practice and others wowing to do something about it.
“If we do something like this [self-regulate], it will certainly be this year, because I think the window is closing on the industry in terms of how long we have to essentially self-regulate without top-down enforcement actions really putting a freeze on token activity,” Selkis told CoinDesk.
He went on to describe how self-regulation, if done properly, could help all parties involved; and even citing the Financial Industry Regulatory Authority (FINRA) and the National Futures Association (NFA) as great examples of self-regulatory bodies that get the job done.
A database of tokens
Selkis originally announced Messari in October 2017, which at the time was called an open-source EDGAR (the public SEC database for securities) for tokens.
It is, however, unclear how similar database will work with cryptocurrencies, which are decentralized, global and hard to pin down. Selkis thinks that at the end of the day the platform could advance based on social pressure, and a few other factors.
The model, which he calls “token-curated registry,” is still not finalized and is “subject to change.” From what we’ve understood, said registry would include a list of compliant projects funded by ICOs, vetted by people that hold a token to allow them to control who gets on the list.
Selkis think that those vetted voters will be key stakeholders in the industry — including hedge funds, exchanges and advisers — which regulators would hold accountable if investor abuse became widespread.
“As stakeholders, I think there would be intrinsic benefits to owning a stake in a system that greenlights token offerings as abiding by certain minimal levels of transparency and standards,” he said.
Also, each token and accompanying project on the list would have to make certain disclosures, such as the vesting schedule for different groups, commitments to auditing and the token’s economics.
In turn, Messari could indirectly reinforce good behavior since stakeholders would become reluctant to work with companies that fail to get on the list.
Work in progress…
As we noted above, Messari is still not finalized, and there is a lot of work ahead, technical details and legal structure of the project being among them.
“There’s still a lot of research and development to do this right,” Selkis said, adding that he want to work with players from across the industry to make the self-regulation really work.
“We’re just not in a rush, because I think this is a one-shot deal to get consensus around,” he concluded.