The way to clean up the crypto space is not necessarily more rules, but instead better enforcement of existing rules, believes the American billionaire hedge fund manager Bill Ackman. But even then, the job will likely take regulators years, he said.
The legendary investor’s views on crypto regulation was shared in a lengthy Twitter thread over the weekend, where Ackman also made it clear that regulators may actually never be able to fully catch up with what goes on in crypto.
“Regulators need more resources to police the bad actors. Unfortunately, it will likely take years for the regulators to catch up, and they may never get there,” Ackman, who founded and still heads the hedge fund Pershing Square, wrote in one of his tweets.
He added that because of this, self-regulation and self-policing within the crypto industry will be necessary to avoid a total regulatory crackdown.
“Not sure we need more rules”
According to Ackman, most of the fraud that is currently taking place in the crypto industry – such as pump and dumps – are in fact covered by current regulations. As such, what is needed is not more regulation, but just more enforcement.
“With respect to regulation, I am not sure we need new rules. Much of the fraud that is taking place is old-fashioned pump and dump schemes, and failures of custodians to protect customer assets,” Ackman said, while adding:
“I suspect that existing anti-fraud and other laws already govern these violations.”
Crypto still the “Wild West”
Describing the current state of the crypto industry, Ackman pointed out that crypto “remains the Wild West,” much due to a lack of investor protection. As a result, “the character, reputation and track record of the management teams and sponsors of crypto-based businesses are extremely critical in choosing which projects to back,” he said.
Despite this, the well-known investor also made it clear that projects based on blockchain technology and tokens do have some benefits compared to for instance stock options issued by a company.
As an example, he said stock options can be “a powerful tool for business formation and growth” as they incentivize actors within the company, typically directors and employees. However, they cannot be distributed to “a global army of unaffiliated actors to incentivize behavior,” Ackman said, adding that this is where tokens really shine.
“[This] allows for the formation of new crypto-based businesses that could not previously be executed using pre-blockchain business tools,” Ackman said, before finally declaring:
“This is the power of crypto and why I believe in its potential for transformational impact.”