Cryptocurrency regulation is coming, in one form or another. $PAC is being one of the first to appoint a new Regulatory Compliance Officer to help solidify a more secure and compliant financial product.
Bitcoin, $PAC and other cryptocurrencies seem on the cusp of revolutionising global finances, but regulators are unsure of how to deal with such an innovation. According to Microsoft president Brad Smith: “If you create technology that changes the world, the world is going to want to govern you; it’s going to want in some measure to regulate you.” This is certainly the case with cryptocurrencies.
When things go wrong, they attract the interest of regulators, and some things have gone wrong in crypto with warnings of cybertheft, trading outages or allegations of market manipulation.
The two big regulatory questions are how and when. Events have led to a handful of outright bans and a few enthusiasts jockeying for jurisdictional position, but for most markets the approach is optimistically cautious. Regulators around the world are trying to figure out how they should treat cryptocurrencies, while the industry wonders when they can expect firm regulations.
$PAC is happy to introduce Sean, our newly appointed Compliance Officer who will take the helm when it comes to ensuring that $PAC, its business ventures and partnerships align with various existing and future regulatory standards. It’s worth noting that $PAC is one of, if not the first cryptocurrency project to make plans for the future in this regard.
Well, to start my name is Sean Ridgley, I’m closing in on 40 years old and I’m married with kids. My kids range from 20 years down to 3 and I have a 10 year old with non-verbal, severe autism. I live along the Front Range of Colorado and while I have lived in other states I will always find home here.
Like most, I didn’t seek out Trade Compliance, it found me when I took a contract job for an export software development company called Vastera back in 2001. Since then I have stayed close to trade compliance while exploring other fields and I have had the pleasure of working with companies like Sony, Ford and Thermo-Fisher scientific among others. Over the past 17 years I have focused my work on the export side of trade compliance and most recently in the classification and licensing of encryption products. Most importantly I have developed a network of professionals in my industry who have skills ranging from military regulations to electronics manufacturing and beyond.
Regulation in cryptocurrency is an increasingly popular topic, how do you see regulation evolving within the cryptocurrency space over the next 1-3 years? Why?
Just like the 90s and the wide adoption of the internet, world governments are slow to recognize a disruptive new technology, instead choosing to focus on the negative risks. Because the real world benefits of cryptocurrency are starting to show up, government regulators are beginning to move towards handling the digital asset space in ways that are more nuanced than just posting lists of what not to do. They have reasonable concerns; bitcoin for years has been the poster child for criminal activity and there is strong evidence that Iran and North Korea are using cryptocurrency to evade UN and US sanctions.
Because of these reasons and many others, regulation is coming. I’ve spoken to several industry experts in compliance and encryption over the last few months and in spite of nearly 70 years of cumulative experience we found ourselves scratching our heads at how cryptocurrency was going to be handled. My fear is that a newsworthy incident will happen such as an attack or bombing, and we will find out that the attackers were funded using cryptocurrency. The reaction will be swift and severe but worst of all, completely irrational. This isn’t to say that regulators aren’t very good at what they do, only that the process of making sure a law is well crafted will be rushed due to public and political pressure.
Regardless, with the annual price swings of the space we can expect to see industry market caps of $1 trillion, $2 trillion US dollars and up. The larger the digital asset markets grow, the more you can guarantee that a patchwork of government regulations will begin to emerge. I see no reason why we won’t see a significant number of regulatory efforts worldwide within even 1-2 years.
There’s confusion between ‘compliance’ and ‘regulation’. Do you think blockchain projects should adhere to certain compliance procedures to protect against exit scams/ponzi schemes that are so prevalent in the space today?
I don’t think that anyone disputes that the entire cryptocurrency world is awash in a number of scam coins, exchanges and projects. We all know the big ones like Bitconnect, Pincoin and pump and dump groups.
These types of behavior have been all but eradicated from stock markets because of significant regulations on their activities and it should be expected that exchanges who don’t eventually take significant steps to behave similarly will find themselves shut down.
To the original point. Regulation is the creation of a rule. Compliance is following the rule. A common misconception of compliance however, is that it is a zero sum process. Either you do all of it, all the time, with no exceptions or you’re in violation.
This isn’t accurate at all. Part of my work with clients in the past has been to develop their compliance initiatives on a risk-cost analysis. Basically reviewing their business to determine what regulations are relevant and matching a cost effective model of compliance to meet those regulatory requirements.
For example, screening against sanctioned parties has a wide variety of need. Companies like Amazon are screening their customers daily to ensure that they are not doing business with a denied party, whereas electronics distributors may only screen their customer list once a month or less. Meeting regulatory requirements to their extreme can be incredibly costly, and it is necessary to be surgical in how you proceed with being compliant.
$PAC is working on charitable initiatives out in Venezuela, Colombia, Haiti & other ‘at risk’ areas around the world. Why could this be a concern from a regulatory standpoint for $PAC and what can be done to mitigate risk in these areas?
I will decline to speak to the Venezuela project for now as this is something I am working on currently. However, briefly….its complicated.
The United States government does not treat all sanctions identically. There are a number of departments that issue sanctions against individuals and companies including the Bureau of Industry and Security (BIS), The Office of Foreign Asset Control (OFAC) and the US Treasury Department. Each group handles different aspects of trade and deals with different areas of concern. $PAC and the projects that it funds are not designed to circumvent sanctions against countries, companies or individuals, however care must be taken to ensure that $PAC is not inadvertently being used to do so.
There are a number of ways this can be done, and part of my role with the project is to develop these methods, determine a valid risk tolerance, and work with the individual projects to make sure these best practices are being followed. As a community coin, we can all work together to make sure $PAC doesn’t find itself in the middle of an investigation that could have been prevented.
$PAC is a global project and has community members all over the world, do you think regulation and compliance will effect everyone in the same way no matter where they are or do you see region specific regulations coming into play in the future? for e.g. China has more regulation on bans on crypto compared to the UK.
I can promise that the regulatory environment worldwide is going to be a mess over the next few years.
Each country is going to adopt their own framework, many will look to the United States for guidance as it has an outsized impact on markets around the world. As a result, individuals in different countries will be navigating their own personal set of laws and regulations in their home country. This of course creates a challenge for the $PAC team in ways that I admit I’m still trying to develop an understanding of.
Beyond that it’s hard for me to speculate, the number of possible outcomes and how they intersect with $PAC are vast.
Finally, how do you see your role evolving within $PAC both in the short term and long term?
Currently, I see a dedicated group of motivated, caring individuals who are passionate not only about $PAC, but doing good. I want to keep that motivation alive and keep those people driving towards their goals. Getting snarled up in governmental regulations and fending off an investigation because of a well-intentioned project is just about the fastest way I can think of to derail something amazing. I’d like to be a barrier between those issues as well as a public face for $PAC that shows we are a small coin, but intensely dedicated to getting things right. We are one of only a handful of cryptocurrency projects out there that are even dealing with compliance issues.