How Compliance Costs Could Kill Crypto Innovation

The Breakdown

Blockworks

Investing, Business

4.8 • 806 Ratings

🗓️ 7 January 2020

⏱️ 18 minutes

🔗️ Recording | iTunes | RSS

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Summary

In their annual transparency report, Kraken reported seeing a 50% increase in regulatory inquiries as compared to 2018, which CEO Jesse Powell later revealed cost the exchange more than $1m. Between this and stories like the $2m it cost Blockstack to raise $23m in an SEC compliant token sale (8.7% of the raise), it begs the question: will compliance costs fundamentally limit innovation by demanding big war chests to play? Will the most successful companies be those who (like Block One) simply raise enough to pay off the regulators on the back end? We also look at new mining interests in Texas and what it means for Amiercan mining and bitcoin mining in the lead up to the halving more broadly, as well as dissect an op-ed from the IMF’s chief economist on the strength of the dollar over digital alternatives.

Transcript

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0:00.0	Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW.
0:15.0	The Breakdown is distributed by CoinDesk.
0:20.3	Welcome back to the breakdown.
0:22.8	It is Tuesday, January 7th, and today we're going to be talking about the cost of compliance
0:28.8	and what it means that there are pathways now for crypto projects and crypto-related
0:35.2	organizations to do well by the regulations of the
0:39.3	jurisdictions they participate in, but at a certain significant cost. What's that going to do
0:45.2	to the crypto economies? Second, we're going to talk about mining and the recent actions that
0:52.1	are interesting in the context of the happening coming up. And third,
0:56.4	and finally, we're going to be looking at an op-ed from the IMF's chief economist on digital
1:02.1	currencies. So first, let's dive into this question of the cost of compliance. So Cracken
1:09.9	released its annual transparency report. The long and the short of
1:14.8	it is, is that the cost of compliance is increasing. So let's look at some of these statistics.
1:20.3	Cracken, the banner statistic was that Cracken received almost 50% more law enforcement inquiries
1:25.9	from global regulators as compared to 2018.
1:29.5	So they received 710 requests in 2019 as compared to 475 in 2018.
1:36.8	That's almost two per day, and almost three per day if you take out the weekends.
1:41.6	Of that, 61% came from America. That's down as a total percentage.
1:46.2	Last year, 66% came from America. So other jurisdictions are growing as well. The folks that
1:52.9	had the greatest number of requests included the FBI with 116, the DEA with 73, the Homeland
1:59.0	Security with 65, and the SEC made 20 requests. So still, again,
2:03.6	a lot about law enforcement. Now, importantly, in tweet exchanges with Preston Byrne, who had written
	...

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