Coinbase, the most prominent cryptocurrency exchange platform in the US, is planning to go public through a direct listing, the firm announced in a statement on Thursday.
The San Francisco-based firm previously stated in December that it had confidentially filed registration documents with the US Securities and Exchange Commission (SEC), though it hadn’t disclosed that it would pursue a direct listing rather than a traditional initial public offering. Its statement on Thursday did not detail when the stock would be listed or under which ticker.
The SEC has approved a proposal from the New York Stock Exchange to allow companies to raise primary capital while listing directly, removing what had previously been a significant drawback of bypassing an IPO.
Direct listings enable companies to skip elements of the standard IPO. The need to price and sell a block of new equity is removed, allowing the firm to simply list its shares to become available for trading. This method usually requires a high degree of visibility to prove attractive.
As it goes public, Coinbase will join a small number of other tech companies that have previously undergone direct listings. Consumer-facing companies like Spotify have listed directly, and online video game company Roblox Corp has also announced its intention to go public via direct listing.
[ymal]
Founded in 2012, Coinbase allows its users to buy and trade decentralised tokens including bitcoin and Ethereum. It has raised $547.3 million in funds as a private company.
Margin trading in cryptocurrency is not a very complicated process, but it is a volatile one. Traders can use the price fluctuations of cryptocurrency markets to earn a profit, whether it is bears or bulls. But what exactly is crypto margin trading, and how does it work? And more importantly, should you be doing it?
New traders often feel overwhelmed trying to decipher the complications of margin trading in cryptocurrency. If you have tried to Google how it works, you may have come across a glossary of terms like leverage, shorting, HODL, FOMO, forking, margin calls, and several more, which you have no idea about.
However, the basics of margin trading in cryptocurrency are not that complicated. Cryptocurrencies are quite expensive, so most people cannot buy them. Therefore, as a margin trader, you borrow capital to increase your buying power so that you can open positions of far greater value than your account balance.
Margin trading in cryptocurrency is similar to margin trading in traditional finance. It allows you to earn huge profits, but there are additional risks as well. When you are margin trading in crypto, you borrow the funds from a third party like a broker or margin lenders. To do that, you will have to invest an initial deposit and open a position in crypto.
You also have to hold a certain amount in your account to maintain your position. When you are trading on a lending platform, your initial margin deposit will be held by the platform as collateral. Your leverage amount for margin trading will also depend on the rules of the platform you are trading with and your initial deposit.
When you open a position in crypto margin trading, you can either go short or long. When you choose to go short, you bet against the price of the cryptocurrency. That means you anticipate that the Crypto value is going to fall. The long position is the opposite of it, which means you are betting that the cryptocurrency price will increase.
Margin trading in cryptocurrency is not a very complicated process, but it is a volatile one.
Your profits will depend on your initial deposit and your leverage. The initial deposit and leverage will vary between different crypto exchange platforms. Some platforms offer a 10 X leverage while others can offer up to 200 X.
When you open a position and borrow money from a platform to trade in cryptocurrency, the platform will take measures to reduce their risk of losses. So when the market moves against your bet, the platform might ask you to increase your collateral so that your position is secure.
It is called a margin call, and it happens when the value of the cryptocurrency falls below a certain amount. Most platforms will notify you, but it is also essential that you monitor the margin levels.
But if the margin levels fall below a certain amount, the platform might close the position and forfeit your initial deposit, also known as liquidation of the trade. A platform will liquidate a trade to ensure that it does not lose any money beyond your initial margin.
Margin trading in cryptocurrency allows you to reap enormous profits. When done intelligently, you can earn 100 times more profit than traditional financial trade. You can make a profit even when the price of the cryptocurrency falls by going short on it. However, there are some things that you should bear in mind when margin trading in crypto.
[ymal]
Margin trading in cryptocurrency allows you to earn substantial profits, diversify your position, and learn trading strategies. The profits are better because of the high relative value of trading positions, and you can open multiple positions with little investment.
However, crypto margin trading can also result in significant losses because of its extremely volatile nature and greater risks. Therefore, if you are new to margin trading in cryptocurrency, you have to be more cautious.
It is advisable to acquire knowledge about hedging and risk management. Even with adequate knowledge to identify market trends, entry and exit points, it is always best to remain cautious with crypto margin trading.
The UK’s financial watchdog issued a statement on Monday warning prospective investors about the risks of putting their money towards cryptoassets such as Bitcoin.
The Financial Conduct Authority (FCA) encouraged customers to understand the financial risks of cryptoassets and schemes involving them prior to investing, given that they were unlikely to be protected under the financial services compensation scheme or the financial ombudsman service, which help UK investors reclaim their money when a company collapses.
“The FCA is aware that some firms are offering investments in cryptoassets, or lending or investments linked to cryptoassets, that promise high returns,” the regulator said, noting also that some crypto investment firms may be overstating the potential payouts of cryptoassets or understating the risks involved.
“Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money,” the organisation continued. “If consumers invest in these types of product, they should be prepared to lose all their money.”
Bitcoin has experienced an unprecedented 300% rally since October 2020, reaching new milestones regularly in the final weeks of 2020 through to the new year. Last week, the cryptocurrency’s total value passed $1 trillion for the first time in history.
Analysts’ warnings of an overdue price correction came to fruition over the weekend as Bitcoin underwent its sharpest two-day fall in nine months, falling as much as 21% down to $32,389 before stabilising around the $35,650 mark on Monday (around 12% down from its $41,000 high).
[ymal]
In addition to its warning for investors, the FCA issued a reminder to firms that new rules which came into force on Sunday now require crypto companies to register with the organisation and carry out money laundering checks.
The value of the combined cryptocurrency market has passed $1 trillion as Bitcoin and other virtual token prices have seen widespread surges.
Bitcoin hit a new record high of $37,732 at around 5.40 AM GMT, only days after passing the $34,000 mark. The total value of the Bitcoin currently in circulation is close to $700 billion, making up the bulk of the crypto market cap.
Bitcoin’s rise has also lifted smaller cryptocurrencies including Ethereum, cardano and Ripple’s XRP.
Given its status as an alternative asset, crypto’s rise has been attributed in part to investors fleeing traditional markets in the wake of major events. The outbreak of the COVID-19 pandemic and resulting lockdown measures caused a sharp rise in investor enthusiasm which has continued to last through to 2021.
Bitcoin in particular has been sensitive to the political climate. Its latest price rally, which saw the currency’s value rise by 7% over the last 24 hours, came after Democratic candidates won crucial runoff elections in Georgia, giving the party control of the US Senate in addition to the House and, come 20 January, the presidency.
Overall, Bitcoin’s value has risen by 200% since the start of October. The currency has begun to move shift towards the mainstream payments landscape as PayPal moved to let its customers trade using Bitcoin on its platform.
Naeem Aslam, chief market analyst at Avatrade, said the 6 January chaos on Capitol Hill helped to shore up the price of Bitcoin, and said that the currency was “surely and clearly heading towards the next important price level, which is $40,000.”
[ymal]
“A real bull rally has only begun,” he predicted.
Bitcoin reached a value of over $34,000 for the first time on Sunday, a scant three weeks after crossing the $20,000 threshold.
Already the world’s most popular cryptocurrency, Bitcoin now has a market capitalisation of over $600 billion, vying for position with the likes of Facebook and Tesla. It has also passed Visa’s market cap, placing it as the world’s largest financial service.
Cryptocurrencies flourished during 2020 as COVID-19 lockdown measures and fears of a global recession sent investors in search of alternative financial assets. Bitcoin in particular saw strong gains after PayPal announced that it would allow it and other cryptocurrencies to be traded on its platform, a key step towards the mainstream adoption of cryptoassets.
Overall, the price of Bitcoin surged by over 300% during 2020. In the opening days of 2021, its value has risen by almost $5,000, with an 18% jump on Sunday morning before gradually receding.
Equally impressive, new statistics indicate that Bitcoin’s 30-day average daily trading volume between 1 December and 31 December reached $39.1 billion, higher than the average daily trading volume of Apple, Amazon, Microsoft, Facebook and Alphabet stock during the same period ($37.68 billion).
“What’s happening now – and it’s happening faster than anyone could ever imagine – is that Bitcoin is moving from a fringe esoteric asset to the mainstream,” said Matt Hougan, chief investment officer at Bitwise Asset Management.
[ymal]
“If it’s going mainstream, there is just so much money on the sidelines that is going to have to come in and establish a position that it leaves me very bullish for 2021.”
In the coming weeks, US PayPal account holders will be able to trade digital coins including Bitcoin, Litecoin and Ethereum. PayPal also plans to expand trading options to Venmo and some new countries in the first half of the new year.
Fintech company Ripple said on Monday that it expects to be sued by the Securities and Exchange Commission (SEC) for allegedly violating laws against the sale of unlicensed securities when it sold XRP to investors.
The SEC is planning to name Ripple CEO Brad Garlinghouse and co-founder Chris Larsen as defendants in the lawsuit, Garlinghouse told Fortune. In his remarks, he described the suit as “fundamentally wrong as a matter of law and fact”.
“XRP is a currency, and does not have to be registered as an investment contract,” the CEO said. “In fact, the Justice Department and the Treasury’s FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.”
The SEC has been plain in recent years that it considers Bitcoin and Ethereum to be cryptocurrencies and not securities due to their decentralised nature, though the more centralised XRP – the world’s third-largest cryptocurrency – has not received a clear designation.
If XRP is found to be a security it will be brought under new restrictions that would likely have a significant impact on Ripple, which owns 55 billion of the total 100 billion XRP tokens that exist. Part of the company’s quarterly revenue stems from the sale of its XRP holdings.
Ripple is backed by a range of financial services giants such as Japanese financial firm SBI Holdings, Spanish bank Santander and a range of venture capital firms including Lightspeed, Andressen Horowitz and Peter Thiel’s Founders Fund. The company was last privately valued at $10 billion, and XRP holds a market cap of over $20 billion.
[ymal]
SBI Holdings CEO Yoshitaka Kitao said that the firm would continue its partnership with Ripple as it looks to expand further in Asia. “Japan’s FSA has already made it clear that XRP is not a security,” he said. “I’m optimistic that Ripple will prevail in the final ruling in the US.”
XRP responded negatively to news of the impending lawsuit, falling more than 17% to hover around $0.46 on Tuesday morning.
David Smith, a cryptographer from the Smart Card Institute, offers Finance Monthly a beginner's guide to various financial markets and what a prospective investor can hope to get out of them.
Most people get intimidated by the idea of making an investment – mostly because they don’t understand the different types of financial markets and which one could be the best suited for them. Our article today sheds light on the different types of financial markets so that you can make better investments in the future.
Most people are aware of stocks. They are probably the most popular and simple kind of investment that has been around for a really long time. Basically, when you invest in stocks you are buying a part of a share in a public trading company. Some of the biggest companies in the world today such as Microsoft, Apple, Samsung, all sell their shares. However, they sell only a small percentage in the stock market.
Once you buy the stock and the prices go up in the stock market then you can sell the share at a profit. The downside is obviously if the price goes down and you will go into a loss. If you wish to buy stocks then brokers are the right people to get in touch with as they will help you make an investment.
Buying a bond means you are lending money to an enterprise that is either government-owned or is a business. Businesses issue corporate bonds whereas the government issues treasury bonds or municipal bonds. Once you have held the bond for a particular time period and it reaches maturity, you can acquire the bond with interest. Bonds are generally a low-risk investment and come with a lower return as compared to stocks.
Buying a bond means you are lending money to an enterprise that is either government-owned or is a business.
This is a relatively simpler investment. Foreign exchange investors buy a currency that is expected to increase in value in the future and then they make a profit out of it. The profits all depend on the exchange rates at the time of selling.
Mutual funds refer to a pool of investors who are investing in several companies at the same time. These funds are either managed actively, in which the manager chooses the companies for the investors to put their money, or they can be passively managed, in which the fund tracks some stock market investment. There can be mutual funds which are a mixture of actively managed and passively managed funds.
One of the safest forms of investment is a certificate of deposit in which you give money to a bank for a certain time period and once the time period is over you can withdraw the money along with the interest which was pre-determined.
Investing in physical assets means you are buying an asset that holds a market value and can be liquidated when you need the money. These assets can be precious metals, jewelry, property, etc. As in the case of most investments, investors who put their money here expect the prices to increase so that they can sell their property, jewelry, etc. at a higher price.
Cryptocurrencies can be thought of as digital currencies that have market value and are a great investment option. Bitcoin is one of the most famous cryptocurrencies that is now coupled with advanced smart card technology. However, cryptos can be an extremely risky form of investment as their value fluctuates tremendously.
[ymal]
Most people are offered a retirement plan at either their workplace or some other means. Retirement plans are not exactly an investment category but they can be thought of as a means to make other investments as they give you countless advantages such as tax leverages.
A lot of people use annuities coupled with their retirement plans to make investments. Once you purchase an annuity you come to terms with a contract with an insurance company that provides you with payments periodically. The payment duration and the amounts are both predetermined. Annuities are a low-risk investment but they are low-growth as well.
Options can be thought of as a complex kind of stock. An option gives you the ability to either buy or sell a certain asset at a predetermined price at whatever given time. An option may decrease in value and might end up in a loss for the investor.
Overall, financial markets make it possible for companies to acquire capital due to their regulated and open system and enable businesses to balance risk with the help of foreign exchange, commodities and other derivates.
In the present era, every person strives for economic sustainability. People struggle to make ends meet financially, as jobs are paying average wages and businesses are merely covering the running costs under this economy. At a time when there are not many profitable business opportunities, the trading of cryptocurrencies has emerged as a feasible mode of financial investment. Digital currencies have taken the economic world by a storm and it has completely altered the concept of traditional currency.
The global economy has seen major fluctuations over the course of the last two decades. The financial crisis of 2008 proved to be extremely hurtful to businesses, and it was an indication that the traditional concept of currency was unable to tackle modern complications. This is when cryptocurrencies, like Bitcoin, started to make their way into the mainstream financial world.
New investors and traders are now inclined towards digital currencies like Bitcoin. There is an increasing demand for Bitcoin in the digital market. The boom in the prices of bitcoin in 2017 came as a shock to the financial world, and many of Bitcoin’s early investors were able to gain thousands and millions of dollars in profit. Since then the business world has kept a keen eye on the performances of Bitcoin in the market.
The traditional banking system is deemed incompetent by the public, as the general perception is that it has too many complications and complexities. Plus, there is a governing body over these banks which keep a regulatory check on every transaction made from a single account. People have to go through a lengthy process even to open an account.
Bitcoin, on the other hand, is an independent entity, and it has provided an easier alternative mode of transaction for the public. Without any external controls, transactions through Bitcoin are more safe and secure. Furthermore,Bitcoin can be traded and mined from anywhere in the world, as it unites the digital world in one forum. However, banks usually do not allow international transactions, and if they do the cost is much higher. The global economic market sees bitcoin as a more feasible and profitable mode of transaction.
[ymal]
Bitcoin is used by millions of people all over the world, and this fact has forced major brands to recognize Bitcoin as an acceptable mode of transaction as well. However, there are still many complications to this new concept which are not simple to comprehend by the general public. This is why there are platforms that guide new traders and investors in the field.
These platforms provide demo accounts to provide practical experience to the traders, and even allow their accounts to function from a minimal investment. They have no extra charges, and they provide market analysis and predictions to the users, which later helps them in gaining trade profits.
These platforms have a high success ratio, and they use modern technologies like blockchain and artificial intelligence to make predictions. Accessibility and feasibility is another benefit of trading through these platforms, because they are easy to use and can be accessed at any time to trade bitcoin on your phone. They allow manual and automated training as per the convenience of the users and give traders a chance to make their own decisions.
With the growing influence of bitcoin and other cryptocurrencies, these platforms are expected to play a vital role in training and guiding new traders. Also, these platforms have a minimal risk of loss which encourages new investors in the industry.
The popularity of financial outsourcing is growing every day, as it enables medium-sized businesses and large companies to improve their financial functions cost-effectively. In this article, we will cover the following points:
First, you need to know that outsourcing is a company's refusal to independently perform a number of non-critical business functions or parts of business processes and transfer them to a third-party contractor who professionally specialises in the provision of such finance and accounting services.
Consequently, financial outsourcing is the transfer of the functions of accounting and tax accounting and reporting to specialised organisations.
Of course, financial and accounting outsourcing is not all. Companies can outsource the following functions:
For example, if you are looking for software development outsourcing, it would be a good idea to look into the web development services of a company that develops custom software from a distance.
If you want to outsource crypto or financial tasks, this does not mean at all that you need to give the intermediary all the available financial information.
Outsourcing can be used for the following assignments:
Now you already roughly understand what functions in the company you can outsource. Now is the time to choose the type of outsourcing.
There are three different types of outsourcing:
So you will need to deal with each type separately and decide which one suits best.
Any modern innovation, like accounting outsourcing or day trading crypto, has its own risks. They should not scare and stop you, you just need to take them into account and think over in advance what you will do in case of an unfortunate situation.
Due to the fact that you, shall we say, start working with new people, there is a possibility of misunderstanding, which can lead to the fact that in one task there will be more details, the implementation of which you did not initially take into account, and this will increase your expenses.
Therefore, try to immediately discuss everything in detail and draw up a specific plan of tasks.
When you delegate tasks to someone who is not on your team, it will be difficult for you to control the process. You will no longer be able to ask daily how the process is going.
Therefore, it is very important to initially establish a high level of trust so that you do not constantly feel that the person will do something wrong.
We have already talked about this above. When you transfer some functions to outsourcers, you will be ready for the fact that you will receive answers to questions, let's say, with a delay.
To make it easier to communicate, you can set a specific schedule so that the outsourcer knows exactly when you will contact him.
Of course, the reasons why it is very profitable for companies to outsource certain functions clearly outweigh the above risks. Let's take a closer look at all the benefits.
According to statistics, the use of outsourcing for a number of functions of company employees reduces costs by 30-45%. This is because there are employees who receive a lot, but for some reason their performance may decrease, which harms the result.
When you outsource a percentage of your work, it automatically creates more time and energy that can be spent on important tasks for the company. Everything is simple here - the less your employees are employed, the better they will perform important work.
Outsourcing finance and accounting, since it is not tied to a specific territory, gives you access to all the people in the world who are looking for outsourcing accounting work. Thus, you have increased opportunities to find a talented and experienced person in their field.
When you hire a new employee, very often they need to be taught, trained, sent to some courses, and so on. With outsourcing finance, all these costs disappear, since you hire a professional in your business who just needs to be given a task.
This is one of the biggest benefits, as outsourcing companies usually use cutting edge technologies that help increase work speed and avoid mistakes as much as possible.
Again, outsourcing is convenient in terms of the quality of work. Your regular employees, who do the same tasks every day, do everything automatically and do not try to change or improve something. By outsourcing finance tasks, you can get not only fresh solutions, but also, possibly, change something in your company.
We have already talked about what benefits a properly chosen outsourcing company can bring to you. The main thing remains - to choose this company.
Therefore, now we will talk about how to choose the right outsourcing company.
Experienced outsourcers always have an established process and structure. You need to look for those who will not only promise a good result, but also clearly show how they will achieve this result.
Also, keep in mind that the team you hire must ensure risk control and data security.
It is clear that you are not going to hire a person from the street, but it will not be superfluous to check the experience of the team, what projects they worked on, and ask for recommendations, and so on.
Ideally, your prospective provider should have methods that will provide assessment and improvement of the company's financial condition, as well as show errors.
Finance and accounting outsourcing services will help you not only decrease the tasks of your employees, but also reduce costs, improve results, improve some activities in the company, and so on.
The main thing remains to find an experienced provider who will meet all the necessary conditions.
A high-quality and well-thought-out process will bring great benefits to your company!
Cryptocurrency hedge funds have made significant gains through 2020, vastly outperforming non-crypto funds.
Crypto Hedge Fund Vision Hill Composite Index, launched in 2018 to track the performance of actively managed cryptocurrency hedge funds, showed a 126% return in 2020. At the same time, BarclayHedge – which tracks over 7,1000 hedge funds – reported that non-crypto hedge fund sectors were also in positive territory, but posted comparatively modest gains of 1.70% through September.
One of the reasons behind crypto funds’ strong performance during 2020 stems from the emergence of decentralised finance, or DeFi, according to Vision Hill CEO Scott Army. “DeFi” refers to crypto platforms that facilitate lending outside of traditional banking institutions. These sites run on open infrastructure and make use of algorithms that track supply and demand to set rates in real time.
Data from industry site DeFi Pulse showed a total of $11.1 billion worth of loans on DeFi platforms as of Thursday, an increase of 180% from the roughly $4 billion recorded in August.
Michael Anderson, co-founder of $100-million venture capital fund and DeFi investor Framework Ventures, said that he believes DeFi will soon break into the mainstream. “Users are trying to vote with their dollars in terms of how they view the capabilities of DeFi,” he said, noting that some DeFi platforms have gained more volume than the far larger digital asset exchanges.
Hedge funds were also boosted by the strength of bitcoin. After a record market slide in March, the currency bounced back quickly, jumping more than 10% in April and going on to rise 80% above its 2019 price. The surge drove rallies in the crypto market, with a knock-on effect on hedge funds.
[ymal]
Adding to crypto’s attraction, large-scale organisations have entered the market this year, accelerating the progress of crypto’s adoption into the mainstream. Earlier this month, PayPal announced plans to allow the trading and holding of cryptocurrencies on its platform. This triggered a new surge in the value of bitcoin, which jumped above $13,000 following the news.
European stocks opened cautiously on Wednesday morning as investors woke to the aftermath of the first US presidential debate between incumbent Donald Trump and Democratic challenger Joe Biden, which was marked by rancorous exchanges.
The French CAC 40 and German DAX were both down 0.2% in early trading, while the FTSE 100 inched up 0.1%.
US futures dipped in the hours following the debate, with S&P 500 futures falling as much as 1.3% before settling at 0.7% down on Wednesday morning. Dow Jones futures and Nasdaq futures were both trading 0.8% lower.
Bitcoin was also trading 2% down on Wednesday morning. The value of the dollar held steady.
With a little over a month to go before 3 November, investors are paying close attention to the US election, the outcome of which will shape the future of the world’s largest economy for years.
A contested presidential election is currently the number one concern for global investors, according to a poll from deVere Group. 72% of respondents described a contested US election as their “biggest investment worry for the rest of 2020”, with 18% fearing a COVID-19 second wave and 5% fearing a US-China trade war. The remaining 5% described other geopolitical issues, including Brexit.
[ymal]
“Investors around the world are beginning to freak about the US presidential election,” deVere Group CEO and founder Nigel Green commented, noting that the possibility of a disputed outcome sparked greater fears than a Biden or Trump victory.
Crypto’s kryptonite?
In guidance released in June 2019, the Financial Action Task Force (FATF) revealed its latest standards for mitigating money laundering and terrorist financing. The 200 global jurisdictions committed to FATF recommendations are required to comply with Recommendation 16 aka the “travel rule”. What this means for Virtual Asset Service Providers (VASPs) registered or licensed within FATF member countries is that they will be required to exchange and hold personally identifiable information (PII) to each other when transferring crypto assets. Many in the cryptocurrency industry have baulked at this and other instances of increasing regulatory oversight, but could this actually be the push the crypto industry needs towards mainstream adoption in the financial market?
The majority of blockchains do not have a built-in protocol to automatically capture the real-world identities of its users, and digital assets are either pseudonymous like Bitcoin, or anonymous like privacy coins. For the more libertarian-minded, this is the big draw towards cryptocurrencies in the first place, though some now view it as a weakness that is impeding the adoption of digital assets among the masses. Over 50% of Americans own stocks, but only 2% own Bitcoin, as estimated in a 2018 Wells Fargo/Gallup poll. About 1 in 4 investors in the US are intrigued by crypto assets but are reluctant to buy it in the near future considering its price volatility and uncertain legal status. There is a need for stability and security in the crypto industry, and regulations could be the key to establishing a safer and more mature environment that can benefit the industry and its stakeholders in the short and long-term.
Setting the rules in black and white
At the moment, crypto-friendly financial institutions and banks are few and far between. Established institutions are put off by the legal uncertainty surrounding virtual assets, a lack of technical knowledge, as well as the costly systems for AML/KYC that are required of them when complying with ambiguous and divergent regulations. On this point, putting in place a clearer and coordinated regulatory framework can help financial institutions categorise and understand the functions of various cryptocurrencies, effectively giving them the green light to invest in virtual assets. We can see that regulation is already affecting the industry in the slew of privacy coin delistings that show how VASPs are taking tougher measures in the move toward compliance.
It seems like any small sign of cryptocurrency’s wider adoption can trigger a substantial price jump.
Eventually, regulations like the “travel rule” will lead to a divide in crypto assets between the regulated and unregulated sides of the coin. By tying identifiable information of users to virtual assets, crypto exchanges and regulators will be better able to identify and validate legal transactions while recognising those tied to illicit activities such as money laundering or terrorism funding. Criminals and bad actors will be driven underground where their digital assets can only exist through legal ambiguity or in clear violation of the law. Unregulated assets will in time become less fungible and their value will be weakened, whereas robust regulation will allow compliant virtual assets to become increasingly stable and fungible, thereby improving their appeal to institutional and individual investors as a legitimate long-term investment rather than a short-term speculative opportunity.
Getting the price right
It seems like any small sign of cryptocurrency’s wider adoption can trigger a substantial price jump. But whether it’s Facebook’s Libra launch or China’s newly announced pro-blockchain stance, the excitement inevitably peters out, and the value of cryptocurrency drops again. A high cryptocurrency price should not be the end goal — Bitcoin’s rapid price rise in 2017 ended in a crash and massive losses for investors because of market manipulation, over-valuation, and financial scams. What cryptocurrencies need instead is a level playing field where real identities can be tied to illegal transactions, and market manipulators can be stopped and held accountable. In a regulated marketplace, individual virtual assets can be better-judged on their merits and the economic forces of supply and demand, thereby attracting a larger pool of investors who will provide liquidity and allow for a more accurate valuation of cryptocurrency’s worth.
Regulation will also make virtual asset ownership more secure, and set the stage for virtual asset custodians and owners to be more accountable in their transactions. VASPs will have the ability to reject suspicious transaction requests, stop irregular dealings in progress, or reverse transmittals after the fact if law enforcement can establish that they are tied to unlawful conduct. Lawbreakers and con artists will know that they leave a virtual trail behind them even whether their crimes are successful or not. In the long-run, increased cooperation between VASPs and financial institutions means that more sophisticated and technologically advanced security solutions can be developed for the protection of legitimate crypto users. For instance, traditional finance is more advanced in AML-compliance, and VASPs with access to this professional expertise will be better equipped to identify bad actors on their platforms.
In a regulated marketplace, individual virtual assets can be better-judged on their merits and the economic forces of supply and demand, thereby attracting a larger pool of investors who will provide liquidity and allow for a more accurate valuation of cryptocurrency’s worth.
Going the distance
It is surely only a matter of time until we have a solid regulatory framework with which crypto exchanges can operate in different markets. If there is enough coordination between regulators, VASP users will be allowed to send virtual asset transmittals to any regulatory-compliant destination in the world without needing to undergo time-consuming KYC registrations each time they open an account. A universal digital profile linked to their personal identities can instead be created and used for more efficient trading of virtual assets. With improved regulation, traders and institutional investors may be more willing to invest a larger portion of their portfolios exclusively in cryptocurrency if it offers them the same protection as physical currencies.
All in all, it is short-sighted, and ultimately futile, to rail against impending regulation of the crypto industry around the world. Increasing regulatory oversight is merely a step towards mainstream acceptance for cryptocurrencies, and there are far more benefits to outweigh the negatives in the long-run. The writing is on the wall and for crypto to keep growing as a sector, we need more than the experts and enthusiasts to get on board — we need the general public to have trust in and access to the technology. Some VASPs may be afraid that implementing strict KYC processes will hurt their businesses, driving their customers to exchanges with laxer rules. However, to go the distance and have viable businesses in the long run, it would behove VASPs to get ahead of the game and implement solutions that will allow them to be compliant with minimal disruption to their businesses.
Regulation isn’t the end of the line for the crypto industry, it’s actually the starter pistol going off. So now it is up to the industry players, big and small, to work together with regulators in addresses their biggest concerns and have a say in the direction of the industry’s future.
