Despite the lackluster markets, the digital assets space is actually in a fairly good position. Regulators are warming up to Bitcoin and multiple governments are indicating their intention to work with the crypto industry, rather than trying to ban this new technology.
The United Kingdom recently announced their intention to become one of the world’s leading crypto hubs. The government plans to make changes to the 2009 banking act, in order to create a new regulatory framework for stablecoins. For anyone familiar with the Eurodollar market, you’ll know that a lot of offshore dollars originate from London. Given the city’s expertise in international finance, it makes sense for the UK to pivot to stablecoins.
The UK Treasury also announced that they will explore "ways of increasing the competitiveness of the UK tax system", so hopefully more progressive crypto taxation laws than those currently in place (where crypto traders are effectively taxed twice) will follow.
Once a stablecoin framework has been established the UK government also plans to launch a sandbox-style incubator. The sandbox testbed will let companies and government agencies experiment with new ways to integrate blockchain technology into the financial system.
Across the pond, many investors are saying that Biden’s executive order is bullish for the cryptocurrency industry. If everything goes according to plan, the order will prompt regulators to get their act together and create a comprehensive and logical framework for crypto in the United States.
Many people have argued that for blockchain technology to reach mass adoption it needs the support of the world’s largest finance and technology firms. Although companies like Visa and Meta have adopted certain blockchain technologies, they’ll only go all-in once the regulations are explicit and written in stone.
Ripple is a great example of what can happen when regulation goes wrong. The SEC is suing Ripple, even though the company made a concerted effort to conform to the existing financial rules. The end result? According to CEO Brad Garlinghouse, “When I give advice to entrepreneurs that are thinking about building a crypto or blockchain company, I tell them do not incorporate in the United States. The lack of clarity and a lack of certainty means that you are at risk for the exact kind of lawsuit the SEC brought against us.”
Even in the Ripple case however, the SEC are having to make small concessions to the blockchain settlement company, the latest being the decision of the judge to throw out certain documents for “falling outside deliberative process privilege (DPP) protection.”
Kevin O’Leary has said that he believes sensible regulation is the key to mass adoption. In an interview with Yahoo Finance, O’Leary says that the good news is, “The pace and acceleration of policy proposals coming out of bipartisan Senate committees and the Hill has never been greater.” However, O’Leary goes on to say, “There's so much innovation going on in different geographies with regulators at different stages of releasing policy on this, that we have fallen behind in the U.S.”
Canada has approved multiple Bitcoin and Ethereum ETFs, El Salvador made Bitcoin legal tender and the Ukrainian government just legalized cryptocurrency. Portugal doesn’t tax crypto gains and a recent report from Coinhub ranks Germany as the most crypto-friendly nation in the world.
If America wants to be a leader in the crypto space, the same way it’s home to all of the world’s largest internet companies, lawmakers are going to have to pass sensible and thoughtful regulation, and do it soon.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.