As the digital asset industry reaches a critical juncture, a new framework for cryptocurrency market dynamics is emerging. The Blockchain Association’s consensus-driven market structure principles offer a blueprint for a balanced approach to consumer protection and innovation.
The digital asset industry is at a critical juncture, with clarity on regulation and legislation both urgent and achievable. After years of fragmented approaches, the Blockchain Association‘s consensus-driven market structure principles offer a framework for the path forward.
A blockchain association is a non-profit organization that promotes the development and adoption of blockchain technology.
These associations often bring together industry stakeholders, researchers, and developers to share knowledge and best practices.
The main goal of a blockchain association is to create a unified voice for the industry and address regulatory challenges.
For example, the Blockchain Association in the US represents over 40 companies involved in blockchain development.
Members work together to advocate for policies that support innovation and growth.
Consumer Protection and Innovation: A Balanced Approach
At its core, our market structure principles recognize that consumer protection and innovation are complementary, not competing, priorities. We call for ‘standardized disclosures’ and robust safeguards while ensuring businesses can innovate without undue burden. This balanced approach extends to custody, where we advocate protecting individuals’ right to self-custody their assets while establishing clear frameworks for institutional custody solutions.
Distinction Between Financial Activities and Non-Financial Uses
A crucial element of our framework is the distinction between financial activities and other applications of blockchain technology. Smart regulation must focus on genuine financial risks without stifling innovation in non-financial uses of this technology. This extends to the treatment of non-custodial software, services, and smart contracts, which shouldn’t face the same regulatory requirements as traditional financial intermediaries when they don’t custody user assets.
Financial risks refer to potential losses or decreases in value that can occur due to various economic, market, or business factors.
These risks can be categorized into several types, including liquidity risk, credit risk, and operational risk.
According to a study by the World Bank, approximately 30% of small businesses fail due to inadequate financial planning and management.
Effective risk management strategies involve identifying potential risks, assessing their likelihood and impact, and implementing measures to mitigate or avoid them.
Token Classification: Clear Frameworks for Clarity
Our framework addresses one of the industry’s most pressing challenges: token classification. We need clear frameworks for distinguishing between securities, commodities, and other digital assets. This clarity is essential for compliance and growth, particularly as the market matures and new types of tokens emerge.
Global Nature and U.S. Competitiveness
Our framework recognizes the global nature of digital assets while emphasizing and strengthening U.S. competitiveness. We advocate for reducing friction in cross-border transactions while ensuring U.S. markets remain attractive for investment and innovation. This includes establishing a single secondary trading market to enhance liquidity and price discovery.
The United States' competitiveness is influenced by various factors, including a strong education system, innovative technologies, and a favorable business environment.
According to the World Economic Forum's Global Competitiveness Report, the U.S. ranks high in areas such as infrastructure, macroeconomic stability, and market size.
However, it lags behind in healthcare efficiency and labor market efficiency.
The country's competitiveness is also affected by its trade policies, tax rates, and regulatory framework.
Developer Protections: Essential for Innovation
Open-source software developers shouldn’t face liability when independent actors misuse their code. This protection is essential for maintaining the innovation that drives our industry forward. Similarly, we emphasize the importance of network participation – protecting the ability of individuals and institutions to engage in activities like staking, voting, and peer-to-peer transactions on permissionless networks.
A Path Forward: Industry Alignment and Smart Regulation
The consensus we’ve achieved on these principles signals to Congress and regulators that the industry is ready for common sense regulation. We’re not asking for special treatment or regulatory carve-outs. Instead, we’re proposing clear rules of the road that protect consumers, foster innovation, and ensure U.S. competitiveness in a rapidly evolving global market.
The work of enacting smart regulations and drafting and passing legislation remains ahead. But with clear principles, industry alignment, and growing policy sophistication on both sides, we have an unprecedented opportunity to get this right. We have precious few months to get this done – let’s not let this moment pass.
- coindesk.com | A Blueprint for Crypto Market Structure
