The threat of increased regulation and differing regulatory stances from every corner of the globe is creating challenges for cryptocurrency and blockchain innovators. It’s difficult for companies to accurately assess the regulatory landscape and ensure their products and services are compliant, both immediately and in the future.
CoinJournal spoke with David Siegal, CEO of The Pillar Project to discuss the critical topic of regulation as well as exciting developments for the company which will be covered in another post.
Pillar is creating the Pillar Wallet, a “universal smart wallet” which it hopes will eventually allow users to take complete control of their cryptocurrencies and ICO investments, as well as their online data. The Pillar Wallet will also function as an exchange and an e-commerce platform. Incorporating fiat currencies is a further long-term goal for Pillar.
When asked about the difficulties faced when building a product that conforms with differing regulations across the world, Siegal explained the processes that Pillar will use to ensure they “don’t tempt fate”.
“It’s not hard for us because we’re building in a permission matrix,” explained Siegal. The Pillar Wallet will allow users to purchase ICO tokens, but will enable ICO issuers to block out residents of countries where regulation might restrict the operation of the ICO or where regulatory conflicts could exist. “
It’s pretty frustrating for me that I could give Americans a lot more than I’m going to unless the SEC says I can and then I’ll be thrilled to be able to change it. So right now, everybody should understand that we’re all under a yellow flag, right. Everybody is operating under a yellow flag right now, better now temp fate now. Now 6 months ago maybe you could have gotten some forgiveness for not doing KYC or maybe letting Americans buy some things, but now that’s, better stay on the side of extreme caution.
Pillar’s exchange functionality won’t be immediately available to Americans until regulation in the USA which Siegal describes as “murky” and “difficult for people to interpret” is clearer. He hopes that regulators attempt to produce new, modern frameworks, rather than applying older, restrictive and antiquated rules which often do not work with innovative technologies such as cryptocurrency.
“The law and the enforcement of the law are both very outdated. And it puts everybody in a bind, so what can the SEC do? Well, the one thing I wish would happen is that the EU and the FCA in the UK were to make a very clear stance and say we’re really going to redo our framework and we’re going to put something better together for everybody that’s more effective to help keep investors safe.”
Pillar (PLR) tokens will eventually be used to purchase services on the Pillar Wallet and are already listed on Bancor. When asked if Pillar had plans to list on other exchanges, Siegal explained the reasons that this is not a high priority for the company at this stage, again citing regulatory concerns, while giving advice to other companies who’ve raised money via an ICO.
“From the point of view of the SEC, these tokens have security like characteristics between the time of the funding and the time of launching the system where you can use the token in the system. So I look at it as two phases, phase one is build the system, phase two is everybody gets token to use in the system.”
“I think it makes a lot of sense for every ICO to look at it the same way because this is how the SEC are looking at it. They are thinking that these things are so highly speculative and because you can’t use the token, it might as well a security. So, in this first phase when the system isn’t built and we’re still working very hard on ours, I would argue that liquidity which might be good for investors is bad for the project as it’s bad for the token to be seen as a security.”
As well as these concerns, Siegal explained his dislike for the larger cryptocurrency exchanges.
“I actually don’t like the big exchanges because I think there is too much pumping and dumping. But we did list on Bancor and are providing some liquidity. And then when the product ships, then you’ll be able to buy the token in the wallet.”
“We refuse to pay the ransom that it takes to get listed on many exchanges, we have approached several exchanges and we said we want to start selling tokens but we’re not paying you some kind of fee.”
Siegal, like many others, sees the volatility of coin prices as being heightened by those pushing and trashing tokens on social media and forums. These individuals are then making money “both up and down.” The liquidity created is not Pillar’s first prerogative. Pillar is building a system for people who are going to use the system and “use the tokens for what they’re intended for.”
“So, I am not so excited about the liquidity at the moment, when any rumour can move the price of the token a lot. I’m also not so excited about it just simply from the point of view that while we’re cooking the software and haven’t released the product I should not be paying attention to the token, I should be paying attention to the product.”
The regulatory challenges faced by Pillar and other blockchain and cryptocurrency companies developing cryptocurrency related businesses and using ICOs to fund the development of legitimate and credible applications is a common one.
Increased regulation is widely welcomed by the blockchain and cryptocurrency communities, but it’s hoped that regulation will be both fair and equal, so as not to restrict the rapid innovation occurring in the sector. Due to the broad application of blockchain technologies and the extent to which cryptocurrencies could be utilised, this innovation is fuelling advances in financial and many other technologies and sectors globally.
This interview has been edited for brevity and clarity.