Home Altcoins News Importance of Mass Adoption and Profit Making with Cryptocurrencies

Importance of Mass Adoption and Profit Making with Cryptocurrencies

Cryptocurrencies are now being geared to have a major focus on usability and adoption. Adoption is very important for the success of any cryptocurrency. Cryptocurrency is finding wide application as an alternative form of currency.  There are several factors that contribute to the acceptance of cryptocurrency.

Cryptocurrency Technology Moves the Financial Market

The financial markets are any markets where the buying and selling of securities take place.  There are 4 types of financial markets like currency markets, money markets, derivative markets, and capital markets. The major role of financial markets is to ensure liquidity for financial securities by enabling the sale of financial assets.

Is Cryptocurrency a Security?

The Securities and Exchange Commission’s primary theory on whether a crypto asset is a security appears to be based upon whether the blockchain project associated with a crypto asset is, at any point in time, “sufficiently decentralized.” If so, the crypto asset is not a security.

Howey Test

Securities are negotiable financial instruments, which have a monetary value. Normally, securities are issued by companies or governments. Securities are mostly well-regulated.  And investors need to be informed about the potential risk. To what extent cryptocurrencies can be considered securities is unclear. Most of the cryptocurrency exchanges are largely unregulated.  Further, in several jurisdictions, cryptocurrency exchanges are not able to function as they wish to.

The Howey Test requires that for a financial instrument to qualify as a security: 1. There must be an investment in the form of money.  2.  The investment should be in a common enterprise.  3. Those who invest the money should do so with an expectation of profit.  4. When the investor puts in lot of effort for the success of the investment then it is not a security.

Cryptocurrencies do not pass the Fourth Rule in the Howey Test

For instance, the SEC lawsuit Vs. Ripple – the offence was for the Ripple Labs to have released XRP for Capital Fund Raising for the Ripple Labs without registering the token as the security.  Further, the long-standing issue has been a major hurdle to the growth of XRP.

Cryptocurrency transactions are irreversible.  The irreversibility of transactions is something that is not found in the Traditional Finance space. Despite the lack of regulatory clarity, cryptocurrencies are promising. The use cases for cryptocurrencies are increasing in different projects.

Despite all, the SEC are trying to do all it takes to control cryptocurrencies and to bring them under the umbrella of Securities.

The reality is that value or money in any form will not generate returns without mass adoption and third party involvement.  At some point in time, third party involvement will become important.

 

 

 

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Maheen Hernandez

A finance graduate, Maheen Hernandez has been drawn to cryptocurrencies ever since Bitcoin first emerged in 2009. Nearly a decade later, Maheen is actively working to spread awareness about cryptocurrencies as well as their impact on the traditional currencies. Appreciate the work? Send a tip to: 0x75395Ea9a42d2742E8d0C798068DeF3590C5Faa5

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