While there are other factors that can help bring mass adoption to the crypto world led by bitcoin, regulations are the binary checks for regional adoption. Regulatory authorities like CFTC, SEC, and even Congress are looking deep into the applications of cryptocurrencies, analyzing their pros and cons, and forming opinions resultantly.
The speculative behavior of governments and these authorities relating to crypto has risen over the period of time, as it has been used for money laundering, terror financing, ransomware, and other illicit activities on the black market and the dark web. They are refraining from letting these digital assets enter their financial systems. The aim of bitcoin was to form a decentralized economy worldwide, but due to the volatile nature, the price fluctuations have made it far from a transactional currency and makes it more of a commodity rather than a currency. But giving it a status like gold in the market is the next step for the regulators which might take time as SEC is taking its time to understand the pros and cons. Once they are comfortable with the idea of crypto and after the regulations are in place, ETFs of Bitcoin can also be introduced which would not only make it an easier investment option backed by the valuation of bitcoin, but also would bring in retail and institutional investors. Kryptoin’s head of ETPs (Exchange-traded Products) Jason Toussaint compared bitcoin as an asset class to gold. He stated that SEC was skeptical when the Gold Council brought SPDR Gold Shares to the market. He further said:
There was also a lot of learning the SEC had to go through to fully understand and gain a level of comfort with the underlined gold market.
Although the benefits of regulating bitcoin are enormous, in terms of crypto growth and adoption, there still are two schools of thought, on in favor of, and one against crypto regulation. The ones against argue that regulating crypto might actually put governing bodies over crypto and introduce policies that would turn these currencies into nothing more than centralized digital currencies. Others believe that these regulations might bring in actual use cases for crypto, and build the trust of institutional investors. The regulators are looking into similar big projects like Libra and ways of regulating these so that there are no privacy concerns, and no room for illicit activities.
This newly developed interest of these bodies in the crypto space might be the right step that crypto required. CFTC has even started classifying these currencies under the categories of commodity and currency. They have categorized bitcoin and ethereum as commodities, which also is a step ahead for crypto. Brian Kelly, the CEO of the crypto investment firm BKCM and CNBC’s analyst recently gave his comments on CFTC’s decision on classifying Ethereum as a commodity rather than a security. He stated:
The CFTC saying that Ethereum is a commodity is huge for the space. It gives us regulatory clarity. That opens the door for institutions to come in. Everybody is concerned, what if they ban it? The CFTC said ‘we’re not banning it yet, we’re gonna regulate it,’ and now investors can say ‘Put them in my commodity bucket.’
Brian also shared his views stating that the only thing that crypto needs right now is regulations. According to him, regulations at this very period might have a bigger impact on crypto than an ETF can have. Only time will tell what these authorities think of crypto and how this will impact the overall crypto space.