Cryptocurrency Regulations are Bringing in Unintended Consequences

Steven Anderson By Steven Anderson August 11, 2019 Off
cryptocurrency regulations

When it comes to regulatory approval, there is a lot of confusion over the licensing process.  It now seems that financial innovation might be expensive, and therefore, many of them in the cryptocurrency industry is giving up.

Cryptocurrency regulations in the process of arriving at an eventual market structure give way to unintended consequences. Depending upon the kind of rules that the regulators propose investors will choose to either choose or dismiss a financial product. In cases of cryptocurrencies, many of them are identical, and each of them has different price trends and volatility patterns.  However, when it comes to swaps and futures, the regulators look at it differently. Approval issues go to the court, and the court throws suits away, and angry CEOs get to Twitter.

It takes well-informed advocates to appreciate the potential of the blockchain, cryptocurrency, and related-approval matters.

The coming of Bitcoin Futures would add to a layer of maturity in this rapidly evolving sector, which will also provide for alternative hedging mechanisms. There are a lot of hidden messages in the market; however, whatever is hidden is revealing.

Lorenzo Pellegrino, CEO of Skrill, stated, “Many companies claiming to be banks operate in the cryptocurrency ecosystem; however almost all would find it hard to maintain that title in a regulated space. They use this terminology as it implies a level of safety and regulation found in the wider financial world, something that will most likely be missing from their product.”

Regulators are now slowly beginning to realize several revolutions knocking at their door.  Crypto Banks are becoming famous.  This bank typically performs several kinds of bank-like transactions like deposits, savings, lending, borrowing, withdrawals, and investing in different kinds of instruments and financial markets. While this sounds more like a regular bank, the fact is that cryptocurrency is integrated with all of such transactions, which is not the case in regular banks.  Some of these banks have gained legal status in the eyes of regulators.

Progressive policymaking countries will be able to participate easily in the decentralized economy through the crypto bank.  These banks will become the bridges, which link cryptocurrency with fiat currencies.    However, this trend is just beginning, and there is a long way to go for this concept to become an everyday reality.  To legally invest in tokens, a lot of reporting of tax and reporting should be done.

Pellegrino further stated, “While cryptocurrency will play a large role in the future of payment rails, we believe that they will be complementary to the current systems, rather than in full out competition. Established payments companies like ours will be key in helping this adoption.”