Regulating digital assets is no simple task given how different many of them are from traditional securities and investment contracts. While new regulations are being formulated in the halls of the U.S. Congress and the SEC, we expect that greater financial education will help propel new business models and innovations in how they are used. That’s been the case with virtually every innovation in financial markets.
Robert Krugman, Chief Digital Officer at Broadridge, sees this as an opportunity. “Good disclosure will get rewarded both by regulators and consumers,” he says. “Early education and clear regulatory frameworks will reduce uncertainties and risks for consumers, as well as asset creators, financial intermediaries, and exchanges.”
Many types of new digital assets are fundamentally different from securities and funds. Unlike stocks or bonds, which have issuers responsible for disclosure both initially and ongoing, crypto assets in particular are created by project teams and then become community driven. These dynamics challenge not only regulators to create rules that reflect the differences, but also consumers to understand what they are investing in. With crypto operating in a decentralized and real-time environment, investor education needs to be timely, accessible, and ongoing.
The Changing Regulatory Landscape
Cryptocurrency regulation is evolving rapidly as governments worldwide acknowledge its expanding role in finance. In the United States, years of regulatory deliberation or, in some cases, “regulation by enforcement”, have slowed growth in digital assets and impeded the choices of consumers and investors.
“We’re now seeing movement,” Krugman notes. “Recent legislation introduced in Congress aims to define stablecoin usage, reporting requirements, and consumer protections. This regulatory clarity will likely encourage mainstream adoption, especially as major banks like JPMorgan Chase and Citibank embrace blockchain-based solutions.”
Regulation alone is not enough to ensure orderly markets and protection for investors. Investors must be educated on the new assets. Understanding risk, governance, and asset fundamentals is essential to ensuring informed investment decision-making and usage of digital assets.
The Unique Challenges of Educating Crypto Investors
Several factors make educating crypto investors more complex:
1. No Central Issuer – Traditional financial assets, such as stocks, provide data through earnings reports, income statements, and corporate disclosures. In crypto, there is no single entity responsible for information dissemination once the community takes over from the initial project team. After initial registrations and filings, ongoing disclosure means that data must be aggregated from various sources, including “on-chain” (blockchain transactions) and “off-chain” (community discussions, news media, and foundations).
2. Real-Time Information Needs – Unlike stocks, crypto operates in a 24/7 environment. Investors expect up-to-the-minute information to make decisions.
3. Global Market with No Central Domicile – A cryptocurrency can trade across 100+ exchanges worldwide, unlike a stock that primarily trades on a single exchange. Regulatory frameworks vary by country, making it harder to create a standardized educational approach. In this regard, IOSCO (the International Organization of Securities Administrators) provides a means for regulators to coordinate efforts across geographic boundaries.
4. Governance Differences – Crypto governance is often determined by decentralized communities, with proposals and votes impacting the direction of projects. Educating investors on governance structures, voting mechanisms, and decision-making processes is critical.
5. Defining Material Events – In traditional markets, a material event might be an acquisition or executive departure. In crypto, events like blockchain forks or changes in tokenomics can significantly impact valuations, requiring a new framework for assessing risks and communicating such developments.
Delivering the Right Information at the Right Time
Educating investors is about delivering information in an accessible and actionable way. Krugman highlights several approaches to improve crypto literacy:
- Contextual education – Information should be available when an investor is making a decision. If someone is about to buy a token, they should receive relevant risk disclosures and fundamental insights immediately.
- Personalized notifications – Rather than bombarding users with updates where it’s difficult to filter out important information from background noise, crypto platforms should summarize key events on a periodic basis. For example, a monthly “Crypto Asset Statement” could outline major governance changes, technology enhancements, and regulatory updates and be delivered weekly or bi-monthly.
- Simplified presentation – Many investors are unfamiliar with blockchain-specific terms and metrics. Educational tools should translate complex nomenclature and content into intuitive formats.
The Future of Crypto Education
As crypto continues to evolve, so will the methods used to educate investors. “People need to be confident that they understand what they’re investing in,” says Krugman. “Once they do, the future for digital assets is tremendous.”
The industry has already made strides in bridging the knowledge gap, but there is still work to be done. By leveraging new data-driven information tools regulators, exchanges, and financial institutions can help create a more informed and secure crypto investment environment.
At the heart of this evolution is a simple principle: informed investors make smarter decisions. As crypto cements its place in the global financial ecosystem, education will be the key to unlocking its full potential.