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Self-regulatory organizations (SROs)  - whether established by legal mandate or organized voluntarily by industry - can serve as a powerful force for bolstering public trust and encouraging industry growth, especially when it comes to cryptocurrency. SROs draw together some of the highest degrees of industry expertise, flexibly and nimbly provide a complement to formal regulatory efforts, and due to their nearness to an underlying industry are best positioned to respond to industries undergoing rapid evolution. However, for an SRO to optimize its effectiveness, it must gain the support of the industry at large. As an SRO promotes and achieves inclusivity, it puts itself in a stronger position for guiding and shaping sustainable economic growth. When an SRO’s membership and support are limited to only a small swath of the industry that it strives to oversee, it lacks the influence to encourage professionalism, ethics, and public interest orientation on a broader scale.
 

Accomplishing effective stewardship

Whereas regulatory bodies are charged primarily with the enforcement of regulations, SROs have the freedom to serve more as stewards for their industry. They can build community and inspire innovation, utilize education and awareness to advance alignment with standards and guidance, and incentivize compliance. This proactive and constructive approach to industry development allows SROs to act more as a ‘gardener’ - as opposed to a ‘cop on the beat’ guiding the positive growth of an industry. This focus on building a strong industry emphasizes the creation of pathways for businesses to grow in alignment with standards and guidance. 

Although SROs may provide many benefits, when an SRO’s ranks do not include a full representation of the industry - inclusive of small, medium as well as large firms and span the full breadth of the industry their insight and awareness of industry needs and potential will be limited. Further, having the full extent of the industry represented ensures that the full expression of the industry will be reflected in the development of standards and guidance, educational programming, industry voice, and inspection systems. This is important as these elements must be designed to be broadly applied to the whole of industry. For example, their design should not overly burden small and medium firms nor should they be designed in a way that does not take into account the role of the industry in the wider financial sector. Inclusivity allows all firms to be brought to the table and for the whole of industry to grow constructively together. 

Stewarding the growth of an industry often means looking beyond the boundaries of the industry, and into peripheral markets to evaluate and understand developments and trends. In addition to welcoming firms of all sizes and industry verticals, inclusivity means welcoming voices   - at times, even from those beyond the parameters of the immediate industry — into critical discussions. When all voices are heard, the SRO can pilot initiatives that draw upon a wider range of resources and consider the fullest extent of stakeholders and the public interest.

Providing informed guidance

A wise man once said, “Victory is won through many advisers.” Inclusivity boosts the quality of guidance that an SRO can provide by enlarging its pool of advisers. Best practices become even better when inclusivity is leveraged to bring a deeper level of experience and wisdom to the processes that govern and direct an industry.

As industries develop, SROs can be called upon by regulators to assist in the crafting and design of a jurisdiction's legal and regulatory regime. To take advantage of such opportunities, SROs must be able to present themselves as subject matter experts who not only understand the present state of the industry but are also able to discern the challenges that will most likely be faced in the future. Inclusivity allows SROs to convene a variety of groups that bring diverse perspectives and a wide range of expertise. This provides a fuller and more holistic view of the direct and indirect benefits, opportunities, risks, and challenges that exist in a given market and that may extend to peripheral industries and the general public.

Establishing credibility

As governmental groups assess the roles that SROs might play in governing an industry, a key consideration is the SRO’s level of credibility. When the full industry is represented within the SRO, individual interests are less likely to influence its actions. Instead, broad industry representation drives initiatives that promote healthy development for the industry at large. When an SRO fails to pursue inclusivity, it dramatically increases the challenges associated with establishing credibility.

Five years ago, the World Economic Forum declared the dawning of a new age of globalization in which cooperation between public and private groups would be essential to the healthy growth of industries. Since then, digital transformation has made it even more challenging for regulators to oversee emerging and evolving markets. The more support SROs can provide, the more effective regulatory frameworks can become. When inclusivity is allowed to shape SROs, they are better positioned to help with building public trust, fostering market integrity, and maximizing economic opportunity for all participants.