Regulators need deep understanding of crypto for proper regulations

In a fireside talk during the Hong Kong Web3 Festival, Changpeng Zhao (CZ), CEO of Binance, expressed that it is important for crypto regulators to have a deep understanding of the industry to facilitate proper crypto regulation. The fireside chat was moderated by Deng Chao, CEO of Hashkey Capital.

According to CZ, “There is a very natural tendency to borrow traditional financial industry regulations to apply to crypto. Crypto is different from banks and traditional financial industries” He went on to explain that knowing the answers to simple questions like how to classify different assets is important in determining regulations for the industry, as there are many types of cryptoassets, some assets may look like securities, others like commodities or utility tokens, some may even have a combination of these characteristics.

Asked about his recommendation for a good regulatory framework, CZ said that having unclear regulations is “the worst” and having regular clarity is better. He further said that it is best to let the industry develop fully before introducing regulations. The particular reason for this is that it is difficult to predict what is going to be popular in the industry.

In relation to crypto industry players and their approach to crypto regulators, CZ advised that there is a need to be very actively engaged with them. He explained that while many of the crypto regulators around the world are very receptive, there are some who are still very skeptical. However, skepticism should deter crypto industry players from engaging the regulators in talks.

Related: US needs to regulate stablecoins to keep dollar strong: Stellar CEO

In response to what could trigger mass adoption of crypto, CZ said that the fact that many governments are trying to come for crypto could actually be the trigger to make crypto grow. He explained that the government’s efforts to close banks, fiat access and put more restrictions on the traditional financial markets are actually pushing more people towards crypto.

CZ emphasized the need for players in the crypto industry to exercise patience. He said it is important to understand that the first draft of regulations is always far too restrictive, and therefore a balance is usually found in a matter of time.

Hong Kong that supports web3 recently showed support for Web3 by taking great steps to develop the Web3 industry.

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