In the times past, regulators have been regarded a foe for digital assets and blockchain generally, despite the fact that a good number of administrations have pursued innovative fiscal revolutions based on blockchain Technology.
Cryptocurrency Legal Issues
The absence of suitable communication networks among stakeholders in the crypto sphere has been an important factor in this perceived enmity. To put things into perspective, it is safe to assume that regulators do not have an efficient communication channel to reach out to open-source engineers, and sometimes, these open-source engineers do not even want to be reached out to by regulators.
However, even with the perceived enmity, it is important to note that both bodies have similar goals. Some corporate bodies are interested in these new technologies because they want to evade regulation. Largely, regulators are not looking to daunt innovation, and open-source engineers do not want to enable crimes. The need to bridge this communication gap has been acknowledged, and measures are being put in place to solve the problem.
Financial Stability Report
A report titled “Decentralized financial technologies: Report on financial stability, regulatory and governance implications” published by the FSB highlighted the significance of multi-stakeholder deliberations, and stated that regulations and laws are not a 100% perfect tool for establishing a beneficial system. It resolved that input from all participants, including open-source engineers, are important.
On the 8th of June 2019, the G20 held a seminar to deliberate the issue of multi-stakeholder governance. This was undeniably the origin of block of discussions by various stakeholders, including Klas Knott, the vice-chair of FSB, Brad Karr, managing director of IIF, Adam Back, a cryptographer and Jun Murai, who established the first-ever inter-university internet communications network in Japan.
In the course of the seminar, the FSB report and the opinions of other regulators were explained, in addition to the regulatory goals. Also, the countless possible use of decentralized finance, including financial enclosure, were discussed. Famous cryptographer-Back- explicated how blockchain technology is an outstanding tool to attain regulatory goals.
It was also pointed out that multi-stakeholder dialogue would enable strong independent revolutions in decentralized finance. Stakeholders further settled that the multi-stakeholder dialogue is important for decentralized finance to be made a reality.
Defining multi-stakeholder governance
Typically, governments lean towards reserving their right to regulate everything. However, the internet, which generates a global space of communication, was the first contest to this order, and is also one of the most positive cases of multi-stakeholder governance.
In the situation of the internet, the government sought to be the only unit of governance, but the effort was unsuccessful, as governments are only stakeholders of Internet Governance Forum (IGF) and Internet Corporation for Assigned Names and Numbers (ICANN). The internet is a brilliant example of a system that enables a large amount of independent innovation, but is also meeting regulation requirements.
It is projected that the finance industry will present a similar situation and this is the reason why these financial bodies are working toward a dialogue, even though the involvement of multi-stakeholders might imply reducing their power of governance.
At this point, stakeholders consist of open-source developers, regulators, business entities, consumers and academia, who are all looking for solutions to the existing disorder in terms of regulation and innovation in finance. It is expected that multi-stakeholder dialogue on these goals will produce better governance than regulation.