Regulators Are Landing Punches, But There's a Long Crypto Fight Ahead

In a blog post announcing the move, CEO Erik Voorhees, a prominent crypto libertarian and vocal proponent of individuals' rights' to private value exchange, acknowledged to his customers that the mandatory aspect of the new model "Sucks." And in a reply to crypto developer Greg Slepak's suggestion on Twitter that he write an "Honest blog" about what happened, Voorhees responded by saying "What I write is being watched very closely. Please give us time."

Now, with the New York Attorney General's office releasing a report accusing various crypto exchanges of doing too little to prevent market manipulation, one could conclude that regulators are gaining the upper hand in their ongoing battle with the crypto industry's more anarchic elements.

New technologies, the dynamic development of token-based business models and an evolving regulatory landscape will continue to create avenues for blockchain and cryptocurrency developers to protect privacy and challenge government intervention.

That, in turn, will spur regulators to pursue new enforcement approaches to maintain their power, which will be followed by new solutions from the crypto side to deal with those efforts.

Crypto technology is, for example, ensuring that the New York Department of Financial Services no longer has the de facto global reach it wielded under the previous assumption that any decent financial entity had to operate in the New York market.

We'll have to see if there's any negative fallout for Kraken CEO Jesse Powell, who mockingly responded to the NYAG's report by comparing the state to "That abusive, controlling ex you broke up with 3 years ago but they keep stalking you, throwing shade on your new relationships, unable to accept that you have happily moved on and are better off without them." However, Powell's bravado suggests Kraken is confident it has successfully shut itself off from New York residents and so can, effectively, tell the state's officers to take a flying leap.

Ironically, Kraken is able to derive that confidence because of sophisticated technological new tools for managing customer accounts that KYC compliance officers call for - such as monitoring IP addresses, which can indicate if someone trying to trade on the exchange's site is in New York.

Once powerful price discovery systems, atomic swap mechanisms and safe custody models are built so that buyers and sellers can find each other without intermediaries, what's to stop a new "Satoshi Nakamoto" from anonymously bequeathing such a system to the world and avoiding the clutches of the law?

On Friday, Rep. Tom Emmer of Illinois, a new co-chair of the Congressional Blockchain Caucus, announced he would introduce three new bills providing safe harbor protections with lightweight regulatory models for blockchain startups.

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