You don’t usually go to lawyers and compliance executives for juicy quotes, but right when we started our call David Ackerman, head of compliance at MobileCoin, assured us that he’d tell me how it really is. “I've been media trained as if I was at gunpoint for the last seven years,” he tells me through a grin. “Oh, man, it's awful.”
Ackerman bristles at the challenge to talk-10-minutes-and-say-nothing because he prides himself on being candid. But it’s about more than that: he wants to talk about crypto regulation because he is witnessing the impact of its growing pains on the public and the regulators — we all desperately need to better understand the space. “Thirty-eight percent of American adults are likely to buy crypto in the future. That suggests that between 100 and 130 million Americans will seek to buy cryptocurrency in the future!” he says. “So if crypto remains unregulated in those next few years, that could potentially pose a systemic risk to our financial markets.”
We gave Ackerman a call to better understand the future of crypto regulation and how much of crypto’s future falls on industry leaders rather than regulators. Spoiler alert: it’s going to take candid conversations with the public that have become far too rare these days.
It's the same challenge that it's been facing in previous years: the regulatory landscape is still very opaque. Because of that, attempting to continue to innovate and maintain some form of competency in the field is severely hindered. People like me are really trying to work best within the confines, trying to do the right thing by pinning our decisions to previously enacted regulation or enforcement actions. We really give as much guidance to the business as we can.
Totally agree. In any financial environment where there is uncertainty around the legal structure, there is confusion and there is a stifling of creativity. Many companies are so concerned about trying to be as conservative as possible that there is a very strong argument that the end client is not getting the full value of what can be done.
If you told me five years ago that we wouldn't have any regulation or legislation around stablecoin, I would have laughed at you. And yet today here we are. But according to the MobileCoin X&Y Study, which looks at how US adults perceive cryptocurrency, thirty-eight percent of American adults are likely to buy crypto in the future. That suggests that between 100 and 130 million Americans will seek to buy cryptocurrency in the future. So if crypto remains unregulated in those next few years, that could potentially pose a systemic risk to our financial markets.
You’re right. That’s why it's incumbent upon those in the industry — and particularly those who come from traditional finance, like myself, who come into this new world of crypto — to not just understand the business, but help educate the public, the lawmakers, and the regulators. First and foremost, our job is to educate the public. In doing so, you help define what the industry looks like and what its goals are. So, that is a duty all of us share.
And it's not unique to crypto — it's the same in any budding industry where there's displacement and where you're going to need people to step up and take ownership of the fact that this is unknown to most. Eventually, in time, it will be just like a credit card or any other financial instrument that people don't think twice about. But for the moment, it's new, it's scary, it's innovative, it's exciting, and it's something that we need to share and learn about together.
Step one is understanding the market. So, in the study that I referenced before, the MobileCoin X&Y study, we found that eight in ten Americans are concerned about the unpredictability and potential decrease of crypto's value. So, that is something that we need to address as an industry. That is a legitimate concern that people have expressed that any company in the crypto space has to address, right? But you can't address a problem, unless you know it exists. You don't know what you don't know.
There are those two use-cases but also probably 100 more use-cases that we haven't thought of yet. But the two main opportunities at this point are storage of value and payments. The storage of value, what some call digital gold, is difficult to quantify. Because, in some cases, there's a lack of liquidity and it's just very complicated to buy.
On the payment side of things, the real concern is privacy and data. Traditional blockchains are completely open and transparent, so if you purchase something with Bitcoin, you have three main factors that need to be addressed. One is speed: it takes anywhere from 30 minutes to 36 hours for a blockchain transaction to clear. Imagine trying to buy a cup of coffee, and then not being able to drink it for 36 hours — I would be in a murderous rage. The other issue is cost: the gas fees — which are the fees that people pay in order to have the network-validated transaction — are incredibly high. So, you have a cost barrier, you have a functional barrier, and then, lastly, you have a data barrier. If I buy a cup of coffee, that coffee house will now have access to the entire history in my wallet, my location, my balance, who I've done business with, and vice versa. For a payment system, that is completely unsustainable.
So, to be successful for payments, those three things must be addressed and then communicated to the public in an effective way.
You might be surprised to hear me say this, but: the future of crypto cannot exist without regulation. Full stop. And I know that may sound counterintuitive. But with any form of investment, form of payment, pretty much any new touch point into our financial system, there is always friction, because there's an education component. What is it? What problem does it solve? And how do we set the rules of the board?
While crypto is going to be a disrupter, it's not going to bring down governments and it's not going to have the world collapse in on itself and have a fully agrarian society again. More likely than not, we are just witnessing the next iteration of technology on finance. And in the United States, this is a system that was created in the late 1700s, and for the most part, the banking system hasn't changed much since then. The fundamental principles of banking and crypto are almost identical. What's changed is the technology, which gives us a new infrastructure and speed at which we can engage.
Over time, very, very intelligent people have developed different forms and mechanisms of increasing liquidity, creating wealth, introducing new concepts such as debt, and things like that. Those innovations are what have made societies grow and prosper. Now we're faced with this new technology, which is fast, cheap, and easily accessible. Opening a bank overseas, in the middle of an area that doesn't have running water, is almost impossible. But now just about everyone has cell phones, satellite coverage, or some ability to get onto a network, so those barriers have largely disappeared. That means we have to rethink everything that we thought we knew for the last 400 years of finance, and see what is possible.
When you ask that monumental of a question, you have to figure out not only is it possible? but also how do we protect people using it?
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