Crypto

Hoskinson Introduces Software-Enabled Crypto Self-Regulation to Congress

Cardano co-founder Charles Hoskinson has told Congress that it should establish regulations for cryptocurrencies, but leave enforcement up to software developers.

Hoskinson compared the ideal arrangement for crypto regulation to how bank self-regulation works during a congressional hearing on June 23, telling lawmakers that “it’s not the SEC or the CFTC that’s doing KYC-AML.” , are the banks.

“It is a public-private partnership. What you have to do is set those boundaries, then what we can do as innovators is write software to help make that happen.”

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are two of the financial regulators battling for jurisdiction over the crypto industry.

Related: US Congressional Hearing on Digital Asset Regulation Focuses on Disclosure

Republican Rep. Austin Scott of Georgia raised that neither the SEC nor the CFTC have the manpower to oversee the thousands of cryptocurrencies on the market, saying “it’s not possible to regulate all of these coins.”

Hoskinson countered that the ability of cryptocurrencies to store and transfer data meant that they could do much of this regulatory work automatically. He also used it as a justification for allowing the crypto industry to create self-regulatory organizations (SROs) to guide regulatory compliance, like the private banking industry does.

Hoskinson suggested the industry could create a “self-certification system” that could automatically monitor compliance until an anomaly is found, at which point a financial authority would review it.

To further illustrate why labor should not be a concern for crypto regulation, Hoskinson hypothesized that even quadrupling the size of the Internal Revenue Service (IRS) would not be enough to audit all Americans.

Rather, Hoskinson told Rep. Scott that cryptocurrencies can be programmed to prevent transaction settlement until legally mandated checks are in place.

Hoskinson’s June 23 testimony posted via the IOHK website showed that he was willing to work with federal regulators in developing new rules, stating that compliance with regulation and legislation coming out of the US “it should be a guiding value for the blockchain industry.”

“However, this is a new technology and a radically new asset class that cannot easily fit within the confines of laws and tests created nearly a century ago.”

Hoskinson’s pleas for clearer limits on the crypto regulatory landscape echo those made by other industry insiders in the US last December. SEC Commissioner Hester Peirce recently blamed a lack of regulatory clarity in part for the SEC’s consistent rejection of the launch of spot Bitcoin exchange-traded funds (ETFs) in the US.