Last year, the UK government publicly announced its intentions to make the UK a global hub for cryptoasset technology and investment. Following this, the Treasury Committee recently released a report calling to regulate unbacked crypto assets in the same way as gambling. This was due to concern about “the potential ‘halo’ effect that could arise from regulating consumer crypto trading as a financial service”.
This report, which described crypto assets as having “no intrinsic value” and having “no discernible social good”, has left the DeFi industry unnerved. With the UK in the race for crypto supremacy, this report comes at a delicate time leaving uncertainty of what this means for the future of DeFi.
We look at the opportunities and challenges facing the industry amidst all this change and ways businesses can survive through it.
Here comes the crypto spring?
After a period of standout price gains, the volatile drops witnessed across the major cryptocurrencies ushered in what is now termed the ‘crypto winter’. During this period, coins such as BTC and ETH hovered at low valuation points, consolidating at a price many pundits considered to be an accurate reflection of their true value. BTC had lost nearly 60% of its market value in 2022, leading many to question whether cryptocurrencies would ever reach the highs achieved in the previous summer.
Now, it seems a recovery play is in the works. BTC and ETH prices have been rising, and government bodies in the UK and the US are ramping up efforts to see which regulatory policies are warranted. From a state perspective, it demonstrates that governments don’t see cryptocurrencies and decentralised finance disappearing anytime soon. It’s also an interesting play when we consider the philosophical implications behind the move.
One could argue that the success of decentralised finance comes more broadly from the fact there has been no state intervention. Without intermediaries, cryptocurrencies have challenged the traditional perspective towards mainstream finance. The concern is that regulation, or an attempt at it, will either not be effective or undermine the comparative advantages of it.
The UK Parliament sparked significant discourse when it said that cryptocurrencies should fall under the same laws and regulations as gambling. Crypto enthusiasts were critical of the announcement, arguing that such a consideration reflects the lack of government knowledge around these markets and how they work.
The reality is that some form of regulation is warranted should businesses and consumers be able and willing to fully embrace the advantages derived from blockchain technologies like crypto. Providing protections to avoid drastic price shifts and the ability for different cryptocurrencies to be exploited to the detriment of the wider market.
If regulation of the retail cryptocurrency industry is going to be as imminent as the recommendations set out in the Treasury Select Committee report suggests, it is important that industry stakeholders proactively engage with policymakers.
It is not enough for companies in the DeFi space to passively accept policy changes. It is instead important that organisations actively try and influence regulation to ensure their expertise is incorporated into anything that could impact the sector. Incorporating a Public Affairs strategy into your business, means that you aren’t just seen as a thought leader in your sector but can attempt to ensure that any policy is not commercially damaging and allows your sector to flourish.
A new dawn for DeFi
For those organisations based in the decentralised finance sector, having a long-term communications strategy in place to support their wider engagement with the public is key. Part of this needs to include a clear, visible spokesperson who is able to be established as a thought leader in this space.
From a media perspective, journalist perceptions of cryptocurrencies have changed significantly. Over the last decade, we have seen the rise of sector-niche Web3 publications focused on covering the latest regulatory trends and price movements of major and minor coins. At the same time, this has led to the rise of influencers and spokespeople championing the value of decentralised technologies in improving the efficiencies and effectiveness of traditional financial processes.
With government interest homing in on decentralised finance, national and international media outlets are also taking a keen interest. For those not fully averse with cryptocurrencies, it can seem like a difficult market to navigate. As such, there is a clear opportunity here for a new generation of Web3 spokespeople to engage with the media and provide valuable insight, thereby addressing the public knowledge gap that currently exists.
A public relations and communications strategy can provide leaders in decentralised finance and Web3 technologies with access to the media, both in key trade titles and the wider national media titles. Partnering with an agency can also support brand positioning, helping to determine what brand values a company should be pursuing and how this will ensure they stand out from the competition.
Alongside coverage, having a Public Affairs element to a communications strategy is also important. Like in the UK, governments around the globe will be looking to see what kind of regulations will be required to ensure the necessary business, investor and consumer protections are in place when it comes to engaging with cryptocurrencies. Their lack of knowledge on the topic could lead to the introduction of policies that hinder sector innovation and undermine their advantages. From open letters to submissions with policy bodies and committees, there are plenty of avenues for public engagement.
An effective integrated strategy devised by specialists in the sector will help you communicate what you bring to the table in a way that resonates with the media, creates an impact and helps you cut through the jargon the rest of the industry is putting out there.