Cryptocurrency and the Securities and Exchange Commission (SEC) may not always see eye to eye, but there is one thing the crypto industry can learn from the SEC — its whistleblower program. The SEC’s whistleblower program is highly regarded for incentivizing insiders to report securities law violations and protecting them from retaliation. If the crypto industry wants to thrive and gain long-term legitimacy, it needs to establish its own whistleblower program tailored specifically to its needs.
To achieve this, collaboration is necessary between the SEC, regulators in key crypto jurisdictions such as Hong Kong, the United Arab Emirates, and the European Union, and emerging crypto hubs. By establishing a global standard for whistleblowing in the crypto industry, the program can address the information asymmetry between users and platform operators, mitigating risks.
Creating a global unified whistleblower standard for crypto is no easy task, but it is crucial for preventing malpractice and unethical behavior. The SEC’s whistleblower program, along with the Commodity Futures Trading Commission program, can provide a foundation, but a more comprehensive and explicit program is needed for the nuances of the crypto industry.
Such a program could cover various areas, including malpractice at centralized exchanges, ICO scams, fraudulent projects, manipulation of decentralized finance protocols, and hacks. Many high-profile cases, such as FTX, QuadrigaCX, OneCoin, and JPEX, could have been prevented if a whistleblower program had been in place.
These examples highlight the importance of oversight and the role whistleblowers play in preventing financial disasters. By empowering individuals to report wrongdoing without fear of reprisal, a whistleblower program contributes to a safer and more transparent crypto marketplace.
To make this program a reality, the crypto ecosystem must collaborate. This can involve setting up consultative panels with industry experts, regulators, and representatives from successful whistleblower programs. However, the real impact comes from regulatory bodies that enforce action against wrongdoers while protecting whistleblowers. Linking the program to licensing requirements can accelerate its global adoption and emphasize proactive measures against fraud and misconduct.
Involvement from exchanges is crucial for emphasizing the industry’s commitment to ethical operations. It signals to the public and investors that the crypto industry is dedicated to self-regulation and high standards of integrity, building trust and stability in the ecosystem.
With increased scrutiny and calls for regulation, the time to establish a standard for crypto whistleblowing is now. Addressing malpractice is essential to earn the trust of newcomers and regain the confidence of users who have been affected by bad actors. Failing to act swiftly leaves the market vulnerable to manipulation and fraud, hindering the growth and progress of building a superior financial system.
In conclusion, the crypto industry can learn from the SEC’s whistleblower program to establish its own program tailored to its specific needs. Collaboration between regulators, industry experts, and exchanges is essential to create a global standard for whistleblowing in the crypto industry. By incentivizing and protecting whistleblowers, the industry can prevent malpractice and unethical behavior, fostering a safer and more transparent marketplace.