beincrypto.com
The current bear market in cryptocurrencies could lead to an easing of regulatory focus, suggests one crypto legal expert.
“A small silver lining of a crypto bear market is that it may relieve some regulatory pressure,” said Head of Policy at Blockchain Association Jake Chervinsky. “For good reason, regulators with limited resources focus attention on issues with widespread impact & systemic importance.”
In a thread on Twitter, Chervinsky argues further that shrinking markets lowers crypto’s risk profile, which has been the top concern for regulators.
Not like 2017
To make his point, Chervinsky compares the situation to the last instance of heightened scrutiny, during the 2017 ICO bubble. After witnessing what happened to many participants then, he said that watchdogs this time are much more concerned about the damage that could be incurred given the scale at which crypto has grown in the past year.
Chervinsky also said the way the market had developed did not paint a very encouraging picture for regulators as well. “The bull market kicked off with ‘degens’ farming food tokens in mid-2020,” he said. “Fast forward through 18 months & billions of dollars of speculation in dog money & jpegs, not to mention hacks & rug pulls, & you can see where regulators are coming from.”
Chervinsky also pointed out several developments from 2017 that have raised the stakes in the eyes of the watchdogs. Some of these pertain to the cryptocurrencies; from greater retail participation to the growth of decentralized exchanges and “(far more importantly) massive Other are external factors, such as “global monetary & fiscal instability due to covid, rising geopolitical tension, & a growing domestic partisan divide.”
“Room to breathe”
Influenced by their experience during 2017, Chervinsky believes that the SEC’s current approach has been “not about coherent regulation, it’s about crushing the market.” However, he also believes that this year they have also started to “see the genuine value & potential in crypto.”
With lower prices and less volume, this means fewer retail participants, minimizing the overall risk, and diminishing the need for public intervention, and allowing for some “room to breathe.” Chervinsky concludes. “In that sense, the short-term pain of a bear market could support long-term progress.”