For this week’s Pioneering Conversation, we bring you an interview with Hedera’s VP of global policy, originally published in issue six of Capital Pioneer magazine.
Since it opened for public use in 2019, the Hedera network has operated under a council governance model, with its founding members providing strategic oversight and driving critical updates and enhancements. Today, the council has grown to include 31 industry-leading organisations, from 11 industries worldwide.
To cultivate its reputation as a trusted platform, Hedera’s VP of global policy, Isadora Arredondo, regularly engages with regulators and other policy bodies to ensure the market can flourish under a strong regulatory framework.
CP: Why the focus on regulatory engagement?
We are positioned very differently to other wallet providers or centralised intermediaries in that Hedera is just providing an open-source technology. Anyone can build a product or service on Hedera.
Typically, the regulatory framework internationally sits at the consumer gateway where institutional or retail clients access the product, and so regulations don’t generally try to govern the way that the technology itself operates. We don’t have regular conversations with regulators on the basis of licensing or cost of operation or anything like that.
However, the success of the ecosystem is dependent upon there being a robust and proportionate regulatory framework.
CP: What does it look like in practice?
Our engagement stems from having conversations with either the Bank of England, the FCA or across institutional EU bodies, about the specific innovations that come with the blockchain. That can be anything from engaging in formal consultation processes to attending roundtables and providing feedback through our membership bodies.
We tend to focus on the specific risks to the market and to consumers from an operational and technological point of view. We are asking what are some of the barriers to institutional adoption? What are some of the concerns in cybersecurity? It is very much a technology-focused, architectural conversation to empower financial institutions to build on our network.
CP: How are policymakers encouraging traditional financial players to enter the space?
Across every region, policymakers are having to think very thoroughly through possible trade-offs, mainly between supporting competitiveness and innovation in the market, while also being mindful of protecting their domestic markets and consumers.
Striking that balance has been difficult in an environment where, for instance, the US has pushed really heavily on innovation first, compared to the approach that we have seen in the EU and UK.
CP: What are the main issues regulators are facing?
Fundamentally, the rule book isn’t there yet but a lot of the foundations have already been built. Industry participants are often lamenting the pace with which the regulators have moved to implement rules that are specific to this massive technology and sector.
In a number of regions, in recent years and across different governments, there has been a lot of discussion about becoming a crypto hub. The fact that this hasn’t necessarily translated into a clear set of regulatory objectives is causing tension.
The industry wants a push for ambition – but that push would, necessarily, invite levels of risk. This means clarity, specifically in relation to attracting crypto businesses, is needed.
