The dark side of crypto: how can we grow beyond crypto's wild-west reputation?
Opinion piece by CryptoJelleNL
Last week, we celebrated Bitcoin's 15th birthday. A very tumultuous 15 years later, a lot has changed. To sum it up briefly, initial skepticism moved towards pizza purchases with Bitcoin, then alternative cryptocurrencies were created, adoption of crypto grew, and now trillion-dollar asset managers scramble for a piece of the crypto pie by filing for spot Bitcoin ETFs. We've come a long way.
If we have to believe the government, however, crypto is a good-for-nothing industry riddled with money laundering, terrorist financing, human trafficking, and a bunch of other criminal activity. The Director of the FBI's cryptocurrency team went as far as saying that cryptocurrency and digital assets touch every aspect of criminal activity the FBI investigates. I'm not here to say that he's lying or wrong, but they would probably find that smartphones and the internet touch every aspect of criminal activity the FBI investigates as well. That does not make them bad innovations.
We should not forget the financial empowerment cryptocurrency has brought in countries like Venezuela, Nigeria, and Lebanon, for example. So how bad is the cryptocurrency industry really, and what can we do about it?
Let's dive into a few of the obvious problems we're facing, and things we should do better in the coming bull market.
We have a long way to go
On top of the money laundering, terrorist financing & crime accusations, crypto bull markets tend to result in many unsuspecting victims losing their hard-earned money. Those new entrants are easy prey for bad actors; from scammy influencers to con artists, and scammers to large-scale (alleged) fraud like FTX. Preventing such an FTX-esque debacle should be the first order of business on our agenda. The Atlantic Council was quick to publish their thoughts on this, with attorney Schnapper-Casteras suggesting changes to the way this industry does business.
What can crypto do better?
His first suggestion – implementing proof of reserves – has already been voluntarily adopted by many key players, but without a clear standard for such reporting, it is difficult to compare one organization to the other. Periodic reporting and standardised auditing rules could boost transparency, while at the same time preventing tricks from being used to strengthen the financial reports.
Schnapper-Casteras also suggests a push towards self-policing. While crypto Twitter has ZachXBT as the colloquial town sheriff, the traditional business world has several independent organizations that declare and enforce industry standards. Think for example of the ISO standards that dictate best practices in business and quality management. The crypto industry would be better off with their standard organisation, or a new branch covered under the ISO.
Such a push for self-regulation and standards would also help weed out a few other bad themes in crypto. For one, with stricter self-policing, influencers would have a hard time using their followers as exit liquidity (sending a bullish tweet covering an illiquid altcoin, and then selling tokens to their followers when they buy in) while maintaining a good reputation.
The industry would also benefit from standardization with paid promotions on social media. Whereas the traditional advertising world is very familiar with #ad hashtags, the concepts seem very foreign in crypto. In the discussions leading up to one of my new partnerships on Twitter, the clients were almost surprised to learn that I work with full disclosures for sponsored content. Transparency is far from normalized – and this should change.
Now this is where it gets tricky – how do we implement self-policing, industry standards, and transparency while also maintaining the anonymity that allows people in many countries to escape tyranny and hunger? First-world governments would love to crack down on crypto completely by installing Big Brother-esque overwatch systems, but I don't see that happening anytime soon. The industry will have to work closely together with regulators to find a way to rid this industry of bad practices, while also maintaining its core values.
Educating the next generation of crypto-bro's
This cycle, we have another opportunity to onboard swaths of new users, but to make those new entrants stay, the products have to be easier to use. Blockchains are difficult to interact with – and tools should be built that help less tech-savvy users navigate the wonders of blockchain technology.
If we want to do right by those new users, we should also do everything we can to help them avoid the painful mistakes we've all made in the past – from avoiding rug pulls to getting blown up on unnecessary high leverage. To start, let's look at a few common red flags that new crypto traders should be on the lookout for.
Common crypto red flags
Most crypto scams are built on a few simple premises, which means that once you know what to look for, spotting them is relatively easy.
Firstly, a scammer has to reach out to you in one way or another. If you get a random text message or DM from someone who has a great offer for you or needs access to your account details to fix a problem – be VERY careful. Savvy hackers will impersonate the customer service of your favorite crypto exchange too, so be sure to remember: they will never ask you for your password or seed phrase, nor ask you to send your crypto to another wallet address.
Moreover, when something sounds too good to be true, your instincts are very likely to be right. Investment schemes that offer you crazy returns at virtually no risk whatsoever should be taken with a truckload of salt and caution. A risk-free return does not exist, and guaranteed profits do not exist either!
Conclusion
The cryptocurrency industry has come a long way in recent years, but we still have a long way to go too. With Spot ETFs on the horizon, more oversight from the US government is inevitable – but we can make some changes ourselves too. Better education, self-regulation, proof of reserves, improved UX, and improved transparency in advertising are just 5 examples of where I think we can make great improvements in the coming years.
We should work together – as one industry – to ensure crypto grows beyond its "wild-west" reputation, into a mature sector that can challenge the existing financial system, bringing financial freedom to individuals once again.
Author's Disclaimer: This article is based on my limited knowledge and experience. It has been written for informational purposes only. It should not be construed as trading or investment advice in any shape or form.
Editor's note: CryptoJelleNL provides insights into the cryptocurrency industry. He has been actively participating in financial markets for over 5 years, primarily focusing on long-term investments in both the stock market and crypto. While he watches the returns of those investments roll in, he writes articles for multiple platforms. From now on, he will be contributing his insights for WOO as well.
Check out his twitter: twitter.com/cryptojellenl
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