How Promoting Responsible Practices in the Crypto Space will favor a Sustainable Development
Crypto headlines often revolve around product launches, regulatory crack downs, and scams. What is most shocking is that, for people in the crypto space, it’s just another Tuesday. But that has to change. To achieve mass adoption, Web3 needs accountability systems that foster responsible practices. While the decentralized web aims for freedom from regulations and centralization, a lack of personal responsibility can lead to chaos, much like the Wild West.
A Tale of the Crypto Wild West
Consider the story of Peer Valley, a thriving town fueled by blockchain technology. Its residents embraced accountability through smart contracts, ensuring transparency and reducing fraud. Attracted by all the lucrative opportunities and freedom to build, folks were coming in droves, increasing the town’s population by thousands.
In contrast, the neighboring town of Hackerville suffered from lawlessness and a breakdown of trust due to the absence of accountability measures. Things got so bad in fact, that the whole town had to be shut down by the Centralized Commission of Exchange and Securities (CCES).
This illustrative story of the two crypto towns, Peer Valley and Hacker Ville, showcases the stark contrast between prosperity and complete breakdown resulting from embracing or neglecting accountability. Now, let’s explore how transparency, accountability and responsible practices can shape the future of the crypto industry.
DeFi, Web3 and Accountability
In Web3, individuals build businesses, brands, and engage in decentralized finance (DeFi). They own their data, and embrace principles such as anonymity, pseudonymity, and decentralized finance (DeFi). While this ecosystem offers advantages such as income generation and low fees, it also poses risks for newcomers navigating its complexities and unregulated nature.
Furthermore, it is wide open for bad actors and scammers to come and exploit its infrastructural mishaps and loopholes under the guise of anonymity or pseudonymity protecting their identity and conceiving their transactions.
Scams upon scams – The Wood County incident
The lack of accountability within DeFi and Web3 becomes evident in cases like the Wood County, MI, USA incident. Scammers tampered with a crypto machine, diverting all US funds, and since cryptocurrencies aren’t insured under US laws, the chances of recovery are slim. Criminals exploit anonymity and pseudonymity, taking advantage of the absence of repercussions.
The Importance of Transparency and Accountability
Few stories like that of former FTX CEO Sam Bankman-Fried’s story highlight the dire need for regulation in the crypto industry. FTX was a top cryptocurrency exchange, trading billions of dollars and enjoying partnerships and celebrity endorsements. However, its reputation took a severe hit when a Coindesk article in November 2022 alleged the comingling of customer funds. The subsequent revelations led to FTX’s spectacular collapse.
Though a portion of the funds was recovered, the fact that FTX is preparing for a relaunch underscores the risks of unregulated environments.
Bankrupt FTX begins process to relaunch the exchange, per WSJ
— Wall Street Gold (@WSBGold) June 28, 2023
FTX 2.0 investors. 🚨 pic.twitter.com/kozFq3k0FZ
Transparency and accountability are essential in the crypto industry. Emphasizing disclosure, Wendy O from the O Show stated that transparency of transactions and operations should be industry standards. In a video interview with CoinDesk.tv she states:
“I think it would be good to an extent. I think it could potentially show regulators ‘Hey, we’re transparent, we’re the good guys.’ If somebody’s doing something bad, you can see it. It’s all public.”
Wendy O
Leveraging blockchain’s inherent transparency can demonstrate ethical practices and build trust with regulators.
Role of Associations:
Despite challenges, new associations are actively working to establish frameworks that promote responsible behavior and safeguard user interests. Their efforts aim to foster a culture of transparency and accountability within the crypto space, ensuring long-term sustainability and mass adoption.
For example, the Associations for Professionals in Digital Assets (ApdA) serves as a community-driven body within Web3, actively promoting transparency and accountability. They recognize that true responsibility extends beyond mere compliance and requires true buy-in.
“True responsibility goes beyond ticking a box—it requires being responsible and considerate in professional settings.”, emphasizes Janner, founder of the Association for Professionals in Digital Assets (ApdA) when reached for a quote. He goes on to say, “Maintaining integrity, honesty, and consistency is critical in demonstrating professionalism and fostering trust.”
Market Regulation and Self-Regulatory Mechanisms:
Market regulation and self-regulatory mechanisms play a vital role in promoting responsible behavior. Embedded supervision, enabled by blockchain technology, automates compliance monitoring in decentralized finance (DeFi).
In addition to automated regulation, it is essential that people are at the center of the decision-making process. This promotes community-driven governance and protects individuals’ rights to privacy. To that end, Decentralized Autonomous Organizations (DAOs) bridge the gap between token holders and regulators, ensuring compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) rules. Self-Regulatory Organizations (SROs) led by industry associations establish standards, enforce compliance, and build trust.
By following these responsible practices, participants in the crypto industry build trust, credibility, and contribute to its growth.
Conclusion:
In conclusion, fostering accountable and ethical practices is crucial for sustainable growth and mass adoption in Web3. Balancing innovation with regulation is essential to protect users and build trust. By embracing responsible practices and self-regulatory mechanisms, the crypto industry can thrive, shaping a future where decentralized technologies flourish.
Check out more articles by Emilie here.
