Literally this week, Ether (ETH) surpassed the $ 4000 mark, and Bitcoin (BTC), the world’s most popular cryptocurrency, recently reached another full-time high of over $ 63,000. Meanwhile, Dogecoin (DOGE) continues to run roller coasters after Elon Musk’s “Dogefather” appears on Saturday Night Live, and digital art news collects fantastic prizes in the air in the form of indestructible tokens.
Encryption is cool, whether you like it or not.
However, not everyone is safe. Janet Yellen, the new US Secretary of the Treasury, has previously questioned the legality and stability of cryptocurrency as a valuable asset. After all, the last Bitcoin bubble burst just three years ago. After soaring in 2017, with BTC hitting $ 20,000, card sales in 2018 wiped out assets and attracted comparisons to tulip mania.
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Bitcoiners are called “cultists” because of their enthusiastic support for this new, unstable and mysterious technology. But do not be confused: technical enthusiasts and eccentric billionaires like Elon Musk are not the only ones diving into cryptocurrencies. From JPMorgan to PayPal, well-meaning people on Wall Street and powerful companies in Silicon Valley have acquired Bitcoin at times.
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BTC is now worth over a trillion dollars in circulation. Most large financial institutions, including investment giants and payment companies, support cryptocurrency and the interest from retail investors is increasing. Bitcoin is becoming an increasingly important part of the global financial system.
At the same time, Bitcoin remains in a gray regulatory area, as various governing bodies have standardized a patchwork of cryptocurrency regulations over the past ten years. In many cases, this restructuring is not enough to give ordinary investors confidence in the market, as some of the basic principles of cryptocurrency management are still being discussed. For example, are cryptocurrencies an asset or a security? Well, it all depends on who you ask …
What do investors need to know about cryptocurrency regulations?
One of the biggest misconceptions about Bitcoin – and cryptocurrencies in general – is that the market is a wild west of sorts: out of regulation and full of scams, criminals and scammers. This is simply not true.
Any business that affects consumers in the United States and other jurisdictions is subject to some form of standards and regulations that also apply to digital assets. It may not be a structure built with cryptocurrencies in mind, given that we are at the forefront of revolutionary new technology. However, different rules regarding consumer protection, prevention of money laundering, fraud and other areas apply to different types of activities. Cryptocompanies can work with law firms to interpret and comply with the rules of their business, to the best of their ability.
The current set of coding rules has been built for the last 10 years as the rules have taken over. But that may soon change: Confirm Gary Gensler – the former chairman of the Commodity Futures Trading Commission (CFTC) who taught blockchain and cryptocurrency technology lessons at MIT – as the new head of the Securities and Exchange Commission. The Commission or SEC indicates that the current administration will take digital assets seriously and will seek to provide general guidance for this new market.
Gensler indicated that he is waiting for the Yellen cryptocurrency review to be completed before launching a regulatory agenda for digital currencies. In the meantime, Congress is looking closely. Last month, lawmakers introduced legislation to create a working group composed of industry experts and representatives from the Securities and Exchange Commission and the Commodity Futures Trading Commission to review current digital asset regulations.
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It is difficult to predict what we will see when it comes to regulating cryptocurrencies and various business models in the industry in the near future. However, we have noticed that regulators are becoming more sophisticated and constructive as they understand that they have a responsibility to effectively protect consumers, promote innovation and create a supportive economic environment.
How can institutional investors rely on cryptocurrency companies?
With a large number of cryptocurrency companies emerging in recent years against this confusing backdrop, it is important that institutional investors understand the risks to be avoided when choosing a partner to franchise their digital assets.