Blockchain professionals often face regulatory challenges and uncertainties in their projects and businesses. How can they build constructive and collaborative relationships with regulators and policymakers? In this article, we will explore some tips and best practices to help you navigate the complex and dynamic regulatory landscape of blockchain.
The first step to building relationships with regulators is to understand the regulatory framework that applies to your blockchain project or business. Depending on your jurisdiction, industry, and use case, you may need to comply with different laws and regulations, such as data protection, anti-money laundering, securities, taxation, and consumer protection. You should research and consult with legal experts to identify and understand the relevant rules and obligations, as well as the potential risks and opportunities.
Understand the regulatory perspective specific to an industry, along with the incentives and motivations that drive the legal framework. This understanding is crucial as it allows professionals to anticipate and respond to compliance requirements more effectively. By appreciating the reasons behind certain regulations, such as consumer protection, financial stability and etc., blockchain experts can tailor their products or services to align with these objectives. Furthermore, this approach fosters a collaborative environment where both parties can work towards common goals and enable the design of systems that not only comply valued by both the regulators and the users.
Understanding the regulatory landscape is crucial in navigating the complexities of blockchain projects. Complying with various laws like data protection, tax regulations and consumer rights is pivotal. Consulting legal experts to grasp the nuances helps in mitigating risks and seizing opportunities within the regulatory framework.
Regulations haven't been formalised yet, this is the best time to collaborate with regulators and have dialogues. Establish credibility about your profile, what you've done in web3, what you are building and how you can add value to the discussion. Understand what the regulator's goals are and educate them on the potential of the blockchain. At the same time gain their trust by highlighting the pitfalls and guide them on how they could be avoided.
I think it depends on the perspective of the blockchain professionals if it is from the perspective of technical professionals (IT/engineers), the best approach would be to team up with lawyers who can plainly explain the regulatory framework of the country and identify pros and cons in the framework, then approach the regulators. It is important as regulators often lack practical experience which blockchain businesses face.
One of the quickest ways to understand the regulatory framework is by reviewing case studies of individuals and firms that have broken the law and or the regulations. For example, what did they do? How did it break the law? What law or regulation did it break? What is the purpose of that regulation or law in terms of who is it trying to protect? Did the individual or firm offer any excuses or defence for their actions? How was their defence viewed by the courts/arbitration system? Were any penalties handed out? In your opinion, were the penalties or fines in proportion to the wrong?
The second step to building relationships with regulators is to engage with them proactively and transparently. Rather than waiting for regulators to approach you or react to their actions, you should initiate contact and dialogue with them early and often. You should communicate your vision, goals, and value proposition, as well as your challenges, concerns, and questions. You should also seek feedback and guidance from regulators, and demonstrate your willingness to cooperate and comply.
Regulatory bodies often hold public consultations when considering new regulations or changes to existing ones. Participating in these consultations is a way to provide input and ensure that yours or your business perspectives are considered in the regulatory process.
The best approach is to organise simple introductory meetings where you can explain in plain language how blockchain works (very crucial), no one wants to hear smart technical words that they can`t understand and also mention what blockchain can do for the greater good rather than a business goal.
Many institutions may be reluctant to engage with their regulators proactively, waiting around for schedule engagements. But there is tremendous value in proactively reaching out to your regulators and giving them advance notice of what you're working on, how you're thinking about the risks and how you're thinking about mitigating those risks. It builds trust. It builds credibility. It provides opportunities for early feedback. It builds relationships. ALL of these things will ultimately help your business and your compliance program, and can head off more painful engagements down the road. The trick is when to engage. A good rule of thumb is - Early and often with products and services that you know are coming to market.
The third step to building relationships with regulators is to educate them about blockchain and its benefits and challenges. Many regulators may not be familiar with the technical, operational, and social aspects of blockchain, or may have misconceptions or biases about it. You should provide them with clear, accurate, and relevant information and examples that illustrate how blockchain works, what problems it solves, and what trade-offs it involves. You should also address any myths or fears that regulators may have about blockchain, such as its association with illicit activities or its threat to existing systems.
Regulators benefit from the demonstration of real-world applications, businesses showcasing compliance with the highest standards, and actively addressing misconceptions through practical examples.
In the African context and for energy regulators I don’t believe blockchain would deliver marked benefits. Many governments are early on in the path to digitising systems and platforms. Energy modelling platforms however like Plexos - which could integrate blockchain into IRP modelling - are a more apt tool for many regulators to gain experience of data driven regulation through study of their energy networks
Well,,,,,,Educating regulators about blockchain is crucial for fostering positive relationships. In "Blockchain Revolution," I learned the third step involves dispelling misconceptions and biases. ?? Regulators might lack knowledge about the technical, operational,,,,,,,,,, and social aspects of blockchain, leading to potential misunderstandings. To bridge this gap, it's essential to provide clear, accurate information and examples that highlight the benefits and challenges of blockchain.
5+ years ago, regulators were probably wondering whether crypto was going away. Today, the question they are asking is how will we regulate this. So, most regulators are still extremely early in their blockchain knowledge journey. In examinations or licensing applications, the fewer information asymmetries there are, the better for all parties. The best way way eliminate asymmetries with regulators is 1) more robust communication. Don't just provide short, concise responses. Provide context around all of your business model and compliance controls so they understand a more holistic picture; and 2) Don't sugarcoat the risks. Acknowledge them. Address them. Show regulators how you mitigate them.
The fourth step to building relationships with regulators is to join or form industry associations that represent the interests and views of the blockchain community. Industry associations can provide a platform for collective advocacy, education, and collaboration among blockchain professionals, regulators, and other stakeholders. They can also help establish standards, best practices, and self-regulation for the blockchain industry, and foster trust and credibility among the public and the authorities.
Blockchain industry associations like the Blockchain Association, the Digital Chamber of Commerce, and the Global Digital Assets & Cryptocurrency Association provide platforms for industry members and stakeholders to convene, share ideas, and posit solutions to some of the field's greatest challenges.
The fifth step to building relationships with regulators is to participate in public consultations that solicit input and feedback from the blockchain industry and the general public on proposed or existing regulations. Public consultations can be an opportunity for you to voice your opinions, suggestions, and concerns, and to influence the regulatory agenda and outcomes. You should monitor and respond to public consultations that are relevant to your blockchain project or business, and provide constructive and evidence-based arguments.
Having participated in the Financial Action Task Force (FATF) meeting of their Virtual Assets Consult Group (VACG) shined a light for me on how important engagement is between industry participants and industry governors through public/private sector consultations. Likewise, opportunities for public comment on intended regulatory changes is as important -- if not mores -- than in-person or virtual collaboration between industry counterparties.
Public consultations are an important way to communicate your expertise and also to demonstrate to regulators that you have a perspective worth considering. Submissions can take a lot of time and energy and are essentially a volunteer or pro-bono contribution that you are making, so ensure that you still leave enough time aside for your normal paid work. Occasionally, opportunities may arise to work on submissions with other blockchain professionals, establishing new relationships and collaborations.
The sixth step to building relationships with regulators is to support innovation-friendly policies that enable the development and adoption of blockchain and other emerging technologies. You should advocate for policies that balance the protection of consumers, investors, and society with the promotion of innovation, competition, and growth. You should also support policies that foster regulatory clarity, consistency, and flexibility, and that encourage experimentation, learning, and collaboration among regulators and innovators.
A key to building any good relationship is understanding where the other person is coming from. So to with regulators. The quicker we can acknowledge what they're looking to monitor, protect, mitigate and address, the quicker we can help them meet their own mission and mandate. That in turns means as an industry, we need to promote regulatory actions, policies, guidance and framework that both helps our own ends, as well as the regulators. Promoting policies that completely ignore risks will not further innovation-friendly policies.
Blockchain technology is not "new" per se, but the mainstream adoption of it is in its nascent stages. For this reason, regulation and enforcement is still evolving with new adaptations of threat actors from the traditional finance space to that of the blockchain ecosystem. Achieving a balance with appropriately scoped regulation while at the same time addressing clear and present financial crime threats is one of the main ways the industry and regulators can foster healthy mainstream adoption of a disruptive technology.
In my opinion , its really beneficial to collaborate block chain with regulatory affairs. Because this integration is the future
Advocating for innovation-friendly policies in the crucial step of building relationships with regulators is crucial for fostering the growth and adoption of blockchain and other emerging technologies. Striking the right balance between protecting consumers, investors, and society while promoting innovation, competition, and growth is a delicate but essential task.
in short...........In "Blockchain Revolution," connecting with regulators is crucial for blockchain professionals. ?? Building relationships involves proactive engagement, clear communication, and fostering understanding. ?? Regular dialogues, educational initiatives, and collaboration can help bridge the gap between the innovative blockchain industry and regulatory frameworks. ??
If you want to further develop your relationship with regulators, it helps to place yourself in their shoes and consider: -what problems are they trying to solve? -how are they looking to solve them? -what are the key roadblocks to getting this done? -what thinking and ideas do you have to assist? - who are their clients (taxpayers) and what are their expectations for regulation? - what is the regulator's appetite for risk? - how does the regulator feel about rewards? - what are their major overall concerns about the blockchain sector? -how can you help the blockchain industry address these concerns?