Cryptoregulation Is Like a Flimsy Umbrella in a Monsoon – Op-Ed Bitcoin News

You know what they say, “when life gives you lemons, make lemonade.” But when it comes to protecting your crypto assets on centralized exchanges (CEX), the old adage should be “when life throws your way, build a self-supporting wallet.” Self-custody is undoubtedly a better solution for protecting the interests of customers in cryptocurrency. Regulation alone is not enough.

He wrote the following opinion editorial Joseph Collement, General Counsel at Bitcoin.com.

Don’t get us wrong, regulations are important. It’s like a flimsy umbrella on a sunny day – better than nothing, but not something you want to rely on during the monsoons. Just ask the folks at Gemini, who despite being the most “regulated” CEX, still managed to lose all their “Earn” customers money. Talk about “earning” a bad reputation! ouch

Cryptoregulation is like a flimsy umbrella in the monsoon

But let’s be real, the crypto world is like the Wild West. And let’s face it, the US government is like the sheriff that just arrived in town, trying to figure out this new frontier. They’re like a dad at a teenage party, trying to figure out what’s going on but eventually just getting in the way.

Having worked 5+ years full-time in cryptocurrency as a lawyer, I would venture to say that the problem with CEXs is not the regulation (or lack thereof), but the business model itself. When an entity takes control of customers’ funds, they are incentivized to trade and gamble with that money, like a stockbroker playing blackjack with your retirement savings. Meanwhile, customers are left holding the bag (or in this case, an empty wallet) when things go wrong.

“Regulated” CEXs also combine services such as trading, custody and market making. Unlike a traditional regulated exchange platform, users on many CEXs face off against the exchange itself in a trade, as opposed to another exchange client. This gives CEXs the ability to trade forward and against their customers, a well-known practice carried out by most exchanges, even in the US

And let’s not forget about hacking. To date, around $5 billion in user funds have been stolen in the last 3 years, with just under $3 billion in 2022 alone. But don’t worry, the DOJ is always there to protect you. With their massive crackdown on known crypto criminal organizations like Bitzlato, they will make sure your funds are safe.

Compliance costs CEX billions of dollars in revenue, and the cost is often passed on to the customer. CEXs spend more money on legislation and compliance than on product development. This month, Coinbase invested $50 million in its compliance department under a settlement with the NYDFS, but laid off 20% of its workforce. Lawyers are blockers, not UX designers. And if you blindly follow their advice, you risk ending up with a good old cookie popup.

In all seriousness, self-custody is a way to protect your crypto assets. Fair business practices and non-custodial wallets are key to protecting the interests of investors and customers in the crypto world. Instead of relying solely on regulations, let’s move to a more decentralized model, where users have full control over their own funds and are not at the mercy of centralized entities. Only then can we truly ensure the safety and security of users’ funds in the crypto world.

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What do you think about self-custody as a solution to protect crypto funds? Do you agree that this is a better alternative to relying solely on regulations, or do you think there is a different approach that should be taken? Share your thoughts in the comments below.

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