- Hoskinson thinks that regulators should leave compliance to software developers in the industry.
- The Cardano founder joins other industry leaders in seeking greater clarity regarding crypto regulation.
On Thursday, the US House of Representatives committee on crypto and blockchain invited Cardano founder, Charles Hoskinson, to speak about the industry. During the meeting, Hoskinson suggested that Congress should make crypto regulations. However, they should allow software developers to handle compliance matters.
Hoskinson explains his proposal
Hoskinson argued that his proposal is similar to what takes place in the banking industry. According to him, the banks perform KYC-AML and not the SEC or the CFTC.
What I am suggesting is a public-private partnership. However, there is a need to have boundaries. Then, innovators like us can write the software to make it happen.
The Security and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are the two regulators competing to perform oversight functions over the crypto industry.
However, Georgia’s republican rep, Austin Scott, argues that none of these two regulators have the human resources to regulate the thousands of cryptos in the market. According to Representative Scott, neither the SEC nor CFTC can regulate such vast digital currencies. Hoskinson said such regulation could be automated when responding to representative Scott’s submission.
A self-certification system
He explained that digital currencies could perform most regulatory work automatically since they can store and transfer data. His explanation also lends credence to his previous argument that the crypto industry can be self-regulatory. Hence, he proposed that Congress allow the crypto industry to establish a self-regulating organization (SRO).
This SRO will be responsible for regulatory compliance, similar to how the private banking industry works. Hoskinson also proposed the creation of a “self-certification system.” According to him, this system can monitor compliance automatically unless it encounters an error or anomaly.
When such errors happen, a financial authority will step in to perform a manual review. Hoskinson cited the example of an IRS audit on all Americans to prove that workforce isn’t necessary to regulate the crypto space. He explained that even if the internal revenue service (IRS) should quadruple in size, it won’t have enough workforce to audit each American resident. Hence, the lack of workforce shouldn’t be an obstacle to crypto regulation.
Cryptos for transaction settlement
Hoskinson explained to representative Scott that it is possible to program cryptos not to be used for settling transactions. However, the system can enable cryptos for transaction settlement once legal and necessary checks are completed. The Cardano founder’s testimonial suggests that he won’t mind working with regulators in creating these new guidelines.
Hoskinsons’ June 23 submissions with Congress are already available on the IOHK website. The Cardano founder added that compliance with US regulations and legislation would be a guideline for the blockchain sector.
However, he warned that current laws and tests carried out almost 100 years cant be suitable for blockchain technology and cryptos since they are new technology and asset class. Hoskinson’s request for greater clarity on crypto regulation falls in line with the request of industry participants across the US last year.