Regulation and education go hand in hand for crypto

SINGAPORE is tightening its stance on cryptocurrencies. On Jan 17, 2022, the Monetary Authority of Singapore (MAS) issued guidelines banning the advertising of digital payment tokens (DPT) trading in public areas. Following that, additional restrictions have been introduced in April to clamp down on domestically registered virtual asset service providers (VASPs) who are offering their services overseas while evading regulatory oversight from Singapore regulators.

Regulation is often seen as a hindrance to innovation, especially for an evolving industry like crypto. However, the safeguards and stability it provides is crucial for crypto in particular to gain further traction with the mainstream public, institutional investors and large corporations. At the same time, regulation alone is not enough. The sector also requires better education across the board to improve understanding and reduce uncertainty, which bolsters confidence and encourages participation.

A necessary first line of defence

Despite heavy regulation, bad actors continue to leverage the age-old attraction of "getting rich quick" to dupe thousands of unfortunate individuals into parting with large sums of money. As crypto is still a relatively new concept, retail investors may be tempted to dive headlong into the crypto space without realising the risks involved. This makes them doubly vulnerable - first to the volatility of a market they do not fully understand, and second, to scammers who prey upon that ignorance.

It does not help that we are seeing a rise in the number of influencers across social media platforms who are giving supposedly "technical" analysis on the price movements of cryptocurrencies, or speculating which tokens will be "going to the moon" - even though they have no financial background or knowledge. This is very risky for uninformed investors.

Take the Squid Coin (SQUID) as an example. Inspired by Squid Game, a popular South Korean Netflix series, SQUID became the most-hyped cryptocurrency across Twitter, Reddit and Discord upon release. Almost overnight, its valuation shot up to US$2,861 per coin - largely fuelled by influencers creating posts about SQUID's massive surge and enthusiastically speculating over potential prices.

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However, just a few weeks later, SQUID plummeted to US$0 as the result of a rug pull - an event triggered when the creators of a cryptocurrency cash out their coins for real money and drain the liquidity pool from the exchange. Many investors were left to "hold the bag", further underlining the dangers of jumping into new financial territory without the safeguards of education and regulation.

Building awareness and trust through education

To bridge wary interest with informed decision-making - and therefore acceptance - crypto companies would be well served by taking on the role of educator, as so many other companies with new technologies and in new industries have done. However, true education must come from a place of sincerity and authenticity. Crypto companies must focus on the primary goal of enhancing the audience's knowledge instead of veiled self-promotion if they want their messages to be heard.

Crypto firms should prioritise creating a credible, long-lasting company that is respected by all. Consistency is the key, especially when it comes to reputation-building; if a crypto company regularly produces insightful thought leadership pieces about crypto, holds crypto webinars and participates in crypto events, this will help them explain the industry's complexities and keep the public informed and engaged on new developments. In time, audiences will come to recognise and trust their expertise and authority, and profits will come as a natural by-product of this earned credibility.

Lastly, for the crypto industry to truly "go to the moon" and gain acceptance among governments and financial institutions, crypto players must be open to, and invite, discussions and dialogues with regulators and other stakeholders. They can educate them on the intricacies of crypto to solve existing differences and forge a path forward, thus providing transparency, helping to reduce the stigma around the industry and contributing to its maturity.

The way forward for crypto

It is important to understand that any emerging technology or concept - be it crypto, Web 3.0, or even the up-and-coming buy now, pay later - that has the potential to make waves across any industry will be subject to regulations. It is a tough but necessary job for regulation to keep pace to ensure all interests are protected and safeguarded.

Businesses have an equal responsibility to do their part to grow the crypto industry through education instead of focusing on a quick cash grab. By working hand in hand to exchange knowledge and build understanding, regulators and innovators can combine forces to ensure a safe, profitable and transparent crypto industry for generations to come.

The writer is an account director at Redhill.