Regulatory initiatives that strictly restrict the functions of crypto projects could make access to institutional capital easier for them, but would harm the industry’s development. Ethereum co-founder Vitalik Buterin said this.
Basically, especially at this time, regulation that leaves the crypto space free to act internally but makes it harder for crypto projects to reach the mainstream is much less bad than regulation that intrudes on how crypto works internally.
— vitalik.eth (@VitalikButerin) October 30, 2022
According to Buterin, industry participants should not “chase large institutional capital,” as the ecosystem is not yet ready for such volumes of investment.
«I’m actually glad that many ETF are delayed. … In essence, especially now, regulation that leaves the crypto industry free to act internally but makes it harder to reach the mainstream is far less harmful than regulation that interferes with the internal workings of cryptocurrencies,» he wrote.
The Ethereum co-founder also criticized the idea of introducing KYC procedures in the frontend of DeFi services. In his words, the move would harm the user experience but would not improve project security.
«Hackers are already writing customized code to interact with contracts. Exchanges are, of course, a more sensible place to conduct KYC, and this is already happening,» explained he.
Buterin stated that regulators have two primary goals — protecting consumers and countering criminals. The Ethereum co-founder noted that imposing limits on leverage and transparency requirements regarding code checks are more effective measures in pursuit of these aims.
He also added that the relevant laws should be drafted so that the requirements can be met using zero-knowledge proofs (ZKP).
«ZKP offers many new possibilities for meeting regulatory policy while preserving privacy. We must seize on this», wrote Buterin.
Earlier, Sam Bankman-Fried, the head of FTX outlined his views on cryptocurrency industry regulation.
In September 2022, the heads of the ЕЦБ and ФРС called for stronger oversight of the DeFi sector.
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