Crypto Regulation: Decentralization, Stablecoins, and Permissionless Infrastructure
Summary
The document summarizes Paradigm’s recommendations on the FCA’s proposed application of its Handbook to cryptoasset activities. It argues that regulators should define decentralization using technical criteria such as control of admin keys, on-chain governance, upgrade mechanisms, and validator distribution, while allowing for degrees of decentralization rather than requiring an idealized endpoint. It also recommends tailoring stablecoin rules to their actual risks and to the structure of decentralized activity.
For permissionless blockchains, the response argues that firms should not be held responsible for infrastructure resilience they cannot control. It also proposes U.K.–U.S. coordination on shared decentralization standards, a crypto sandbox, and mutual recognition. The document offers policy arguments and examples of possible criteria, but no empirical evaluation of regulatory outcomes or trading strategies. Its positions are advocacy from an industry participant, and the claims about stablecoin risk and compliance burdens are not supported here with detailed data.
Key ideas
- Decentralization assessments could use technical indicators such as admin-key control, governance, upgrade paths, and validator distribution.
- Regulators can recognize degrees of decentralization instead of requiring protocols to reach a theoretical perfect state.
- Stablecoin requirements should reflect the risks and operating structure of the activity being regulated.
- The response argues that firms should not bear responsibility for the resilience of permissionless infrastructure they do not control.
- Shared U.K.–U.S. standards and a sandbox are proposed as ways to improve cross-border regulatory clarity.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.