- The expertise gap between regulators and industry insiders hampers the effectiveness of regulatory oversight.
- Social media and blockchain technology have shifted the balance of power.
Former Coinbase CTO Balaji Srinivasan has taken to Twitter to argue the diminishing power of regulatory bodies, particularly the Securities and Exchange Commission (SEC), in the ever-evolving crypto landscape.
In his analysis, Srinivasan contended that the regulatory state’s authority is faltering as it struggles to adapt to the decentralized nature of cryptocurrencies. He noted that regulatory agencies historically thrived on instilling fear and compliance, causing companies to crumble under their weight. However, the dynamics have shifted, according to the Coinbase CTO.
Srinivasan points out several factors that have weakened the SEC’s hold on the crypto industry. Firstly, he said the regulatory infrastructure was built to oversee centralized entities, not the vast number of individual crypto holders and decentralized projects present today.
Secondly, Srinivasan highlighted that the expertise gap between regulators and industry participants has widened. He expressed that this lack of domain knowledge hampers the regulator’s ability to regulate the sector effectively.
The Coinbase former CTO also argued that the rise of social media has also played a pivotal role in undermining regulatory power. In his words:
“The fact that agents of the state must argue their case on social media — where citizens can talk back, and where journalists no longer have special privileges — is an enormous fall from grace. The unelected agents of the regulatory state are finally facing digital democracy.”
Srinivasan concludes that while the state continues to fight, it will likely consolidate power over fewer people through harsh crypto regulations. However, he emphasizes that while compliance with crypto laws may be observed in progressive states, most individuals and businesses are actively expected to disregard the rules.