There have been ongoing discussions locally and internationally around the need for and challenges of tighter regulations in the crypto industry.
Only a few months ago, the federal government announced it is looking to tighten regulation in the “largely unregulated” crypto sector.
With the ongoing threats of crypto scams, fraud and identity theft impacting consumers, and the likely upcoming introductions of new regulatory and compliance requirements in the sector, now is the time for the crypto sector to get ready.
In this dynamic market, crypto service providers and those working with the crypto sector need to ensure they are not left behind competitors or caught unaware when new laws and compliance requirements become enforced.
What will the new regulation look like?
The government announced earlier this year they would prioritise ‘token mapping’, which would help identify how crypto assets and related services should be regulated.
Industry commentators have recognised this approach as an important step towards addressing issues such as fraud and hacking and ensuring the ‘appropriate checks and balances’ were in place through stronger reporting, governance, and treasury management.
Until new regulations come into play, ASIC is regulating crypto assets within the scope of its existing framework and has already made interim stop orders against three crypto investment funds.
Building brand resilience and digital trust
The recent collapse of a well-known international crypto provider highlighted how quickly and significantly a brand’s reputation could fall and the domino effect this could have on an entire industry. Society’s digital trust in the crypto market continues to have its highs and lows. Organisations that are taking a long-term lens to brand resilience and sustainability have continued to succeed and retain customer loyalty.
Building digital trust starts with forward planning, but not enough executives are taking this seriously. Recent research shows 98 per cent of the business, and IT professionals believe digital trust is important, though only 12 per cent of organisations have dedicated staff for this purpose.
With 84 per cent of consumers considering switching providers if they lose trust in a company, and as 47 per cent have already stopped doing business with a company after losing trust in their digital security, it is clear that businesses need to take a proactive approach to build and sustaining digital trust rather than assuming customers will forgive them for breaches, mismanagement or human error.
One of the core priorities of incoming regulation will be to enable stronger consumer protection, and financial institutions working in or with the crypto sector should similarly take a customer-centric approach when building digital trust. This should involve recognising consumers’ ongoing financial pressures amid rising inflation and interest rates and a reasonable appetite for reliable and secure investment channels.
Get ahead to stay ahead
By the time new regulations are enforced, any crypto organisations that are not already following those regulations could risk losing digital trust with customers and other legal, financial or operational ramifications.
Getting customers on-side in the regulated crypto world needs to start with preparing for pre-regulation requirements. Customers will expect their crypto providers to already be up to speed, and, as has been experienced with recent high-profile cases where digital trust has been questioned or lost, they will not hesitate to shift their money to a competitor if their expectations are overlooked.
Crypto providers that want to remain in business and build customer loyalty throughout the ongoing changes in the market need to invest now in preparing for incoming regulation.
Not only will customers appreciate the extra measures taken to prioritise their best interests, but there is the added benefit of potentially growing market share over lesser-prepared competitors once the regulation comes into effect and starts impacting the industry.
Dynamic Business does not give financial advice. Please contact your local, competent financial expert for advice or information.
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