The big change in strategy and its consequences

The year 2021 so far has shown how powerful the state can be in the crypto sector. Many vocal crypto veterans had to act meekly on Twitter and Co. in order not to fall out of favor. How the new political influence is noticeable on the orientation of the crypto sector and which strategies have already been copied from other industries.

Everyone has now noticed that the states are tightening regulation in the crypto sector. Former rebels, who do not want to be told by the state, have now become tender lambs. The year 2021 showed more than ever how much the blockchain sector is forced to adapt.

Mainly compliant: rebels are dying out

This is particularly evident Change of strategy from the Binance Embodied CEO Changpeng Zhao (aka “CZ”). As the largest crypto exchange it has Binance making a fortune by operating in a gray area. Should mean what Binance does is by no means illegal, but for the most part the national approvals of the respective financial regulators are missing to be allowed to promote the business regionally. At the same time, numerous jurisdictions have issued warning messages about Binance. In short: CZ realized that it would not get away with the old strategy in the long term. Especially since competitors like Coinbase Going hand in hand with the regulators and enjoying licenses to expand your business regionally, especially in Germany.

Instead of ranting about regulation, CZ has now turned 180 degrees – at least in terms of external impact. CZ regularly flatters the authorities and proclaimed on Twitter, how important a strict regulation is. The highest regulatory standards are now group priority number 1 and are carried out in external communication as a matter close to the heart of the Twitter-addicted CEO. Credible is different. Yet it shows the power of government regulation. Even crypto companies with gigantic capital pots have to bow to the guidelines in the end.

The classic: Supposed self-regulation

An absolute classic in the history of industries that come under state fire is the expansion of proactive self-regulation. With this strategy, one tries to approach the state beforehand in order to suppress threatening, excessive regulation in advance. Just think of the alcohol industry, which repeatedly tries to impose its own industrial standards to protect consumption – keyword: responsible drinking.

This strategic tool is now being pursued, among others, by the newly founded industrial initiative Cryptocurrency Compliance Cooperative (CCC) from the USA. Bitcoin ATM companies Coinsource and Digital Mint founded this initiative in August to address money laundering concerns of the state. Its own high standards are intended to prevent criminals or tax evaders from misusing Bitcoin ATMs for money laundering.

Green mining as a voluntary compulsory event

The newly founded one also strikes a similar notch Bitcoin Mining Council. After a heated public discussion about Bitcoin’s electricity consumption broke out in the spring of this year, the initiative has set itself the goal of promoting sustainable mining. Draft horses like Michael Saylor and Elon Musk support the initiative to promote green Bitcoin mining and thus improve the public image. Finally, some states are using Bitcoin’s high energy consumption to justify a mining ban. The sooner the industry falls back on completely regenerative energies, the better the chances of escaping restrictive regulation.

Elon Musk had to experience for himself how great the pressure is. The richest man in the world had to give in and reject the planned Bitcoin payments for Tesla models. The Silicon Valley rebel, like Binance CEO CZ, has subordinated itself to public pressure. Only when the mining has a sufficiently high level of renewable energies does the Tesla boss want to accept Bitcoin payments for his electric cars.

Decided fate for the crypto sector?

Like other sectors, the crypto industry cannot escape the issues of sustainability and social corporate responsibility (CSR) without accepting massive economic disadvantages. Not everyone may welcome this adaptation, but it is ultimately part of a professionalization. After all, it is no longer primarily about private customers who, if in doubt, also resort to crypto exchanges and custody services that do not meet the highest regulatory standards.

This is different for institutional investors. A German asset management company will therefore use its crypto business in case of doubt Coinbaseinstead of processing via Binance. In most cases, institutional investors also have to justify what they are investing in. If these are Bitcoin mining systems that are operated using coal electricity, for example, then these can also be in need of explanation.

So it is not only the increasingly strict state regulation that is forcing the crypto industry to make certain changes, but also the new customer base, ergo the B2B business. It is no secret that most of the money is there and not with private customers.