Regulation and education go hand-in-hand for crypto

These are necessary growing pains for every new industry.

A version of this story first appeared in The Business Times. Click here to read it.

There is no doubt Singapore is tightening its stance on cryptocurrencies. On 17 January 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 Singaporean 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 defense

Regulation is extremely important across all industries as it provides some protection for the public from both nefarious actors and their own gaps in understanding.

This is especially true in the financial industry; despite heavy regulation, bad actors continue to leverage the decades-old attraction of ‘getting rich quick’ to dupe thousands of unfortunate individuals into parting with large sums of money.

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 to gain further traction.

As crypto is still a relatively new concept for many, retail investors who are focused on ‘getting rich quick’ 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 don’t fully understand, and second to scammers who prey upon that ignorance.

It doesn’t help that we’re 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 who jump on these bandwagons hoping to make a quick profit.

Take the Squid Coin (SQUID) as an example. SQUID is a cryptocurrency token inspired by Squid Game, a popular South Korean Netflix series.

Upon release, it became the most-hyped cryptocurrency across social media platforms like Twitter, Reddit and Discord, with its valuation shooting up to US$2,861 per coin almost overnight. Influencers were responsible for much of this excitement as they created posts about SQUID’s massive surge and enthusiastically speculated over potential prices.

However, just a few weeks later, SQUID plummeted to US$0 as the result of a rug pull. This is an event triggered when the creators of a cryptocurrency cash out their coins for real money and drain the liquidity pool from the exchange. SQUID’s creators did just that, effectively leaving many investors with nothing and holding the bag in an apparent scam.

Cut the bullsh*t

People are interested and curious about crypto, but still wary because of the fear of the unknown. Crypto companies would be well-served by taking on the role of educator to bridge the gap, as so many other companies with new technologies and in new industries have done. They can use education as an engagement focus to increase public understanding of a new sector, drive informed participation and establish trust.

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. The acceptance barrier for crypto is already high because of the prevailing uncertainty, so companies must work harder to overcome it — and that means there is no room for error.

Even before the MAS advertising guidelines on crypto kicked in, I already believed that there was very little value in self-promotional content around crypto products. In fact, it could even paint the company as only being out to make a quick profit, which could deal a severe blow to their credibility.

This is a very short-sighted approach because it might get a crypto firm boosted short-term profits, but the reputational damage would negate further growth opportunities.

Credibility through transparency and consistency

Crypto firms shouldn’t see profitmaking as the be-all and end-all. Instead, they should prioritise creating a credible, long-lasting company that is respected by all.

Consistency is the key; if a crypto company regularly produces insightful thought leadership pieces about crypto, holds crypto webinars and participates in crypto events, then people will come to recognise and trust their expertise and authority. Profits will come as a natural byproduct of this credibility.

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.

I also foresee that educational thought leadership will be crucial to trust-building, which is a fundamental part of what we do at Redhill. By showcasing insights and expertise, public relations (PR) campaigns can create unique narratives that continuously engage and resonate with target audiences for a crypto company over a long period of time. Strategic PR will be crucial to build credibility, educate the public and differentiate one crypto company from the rest in a crowded industry.

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 helping to reduce the stigma around the industry and contributing to its maturity.

The way forward for crypto

It’s 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 system— 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.