The regulation of centralized marketplaces is not a new concept, and lessons learned from those marketplaces can be adopted by the cryptocurrency industry, according to the global head of a cryptocurrency exchange.

“There are core components here that are very applicable to regulating centralized markets such as ours,” said Kraken’s Jonathan Jachym, who spent more than 11 years working at traditional financial market exchanges. “Listing disclosure, market integrity, custody segregation, customer asset protection are all very common themes.”

However, there are risks and benefits of fitting new technology into a traditional framework.

“What we've seen is the intent desire to simply take this new technology and shoehorn it into traditional market rules, regulations and labels, but there are nuances with the technology that will create an outcome that would really damage not just innovation, but also competitiveness here in the U.S.,” Jachym added.

Jachym was a panelist at the 2023 D.C. Blockchain Summit discussing "Building Trust: Understanding the Complexities and Policy Considerations of Decentralization” last week along with dYdX Trading Head of Policy Rashan A. Colbert, Solidus Labs Regulatory Affairs Vice President Kathy Kraninger, and ShapeShift Founder Erik Voorhees.

Angie Lau, co-founder and co-CEO of Forkast Labs, moderated the panel. “We need to make sure we're making protocols permissionless and that builders can build,” Colbert said. “There are secondary things we can do to keep people safe on top of that, but if we're infringing upon speech and the ability for people to innovate, then we're going nowhere fast.”

In the past year, blockchain companies raised $26.8 billion globally and 57% of that money has been invested in U.S. companies, according to data provided by the Chamber of Digital Commerce, but the collapse of FTX has marred the industry.

FTX, once valued at $32 billion, filed for bankruptcy in November as the crypto exchange’s founder, Sam Bankman-Fried, resigned amid accusations of financial misdeeds and fraud.

“It's atrocious that FTX was the darling of D.C.,” Voorhees said. “There's something seriously wrong with that and if the regulators were out to actually protect people, they probably would've been going after FTX for committing the greatest financial fraud in crypto history.” 

Kraninger argued that despite the wreckage, it’s important not to give up on the process.

“You do have people in the agencies who are trying to understand and so getting that engagement around understanding what the opportunity is will take a little bit of time, but it's still very much worth our time as an industry,” she said. “That's why many of us are sitting here and still working and living in Washington.”