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Opinion: The uncertain future of cryptocurrency


The holidays are always an exciting time for cryptocurrency. In the past, the turn of a new year has brought with it the extreme increases and most devastating declines of crypto valuation, but this year the stakes seem even higher.

Over the last two years, the price of Bitcoin and other digital currencies have seen more growth than ever before, driven mainly by the fact that more consumers than ever have added crypto to their portfolios for the very first time.

Since 2018, the number of internet users around the world who own crypto has doubled, and in the U.S. 1 in 10 consumers say they plan on investing in crypto in the next 6 months.

However, the expansion of crypto into the mainstream, and especially onto corporate and traditional finance’s portfolios threatens to change the very nature of an asset that was, up until now, mainly on the fringe of finance.

Regulation brings mixed feelings

Governments around the world have spent the last year or two attempting to find a place for cryptocurrency within their legal and financial systems. On one end of the scale, El Salvador has opened the door for their citizens to use crypto as legal tender, while other countries, like China, have banned the trading and mining of digital currencies outright.

Interestingly, when investors were asked their thoughts on the potential regulation of cryptocurrency, for the most part both current and potential investors supported the move.

In the U.S., over half of all cryptocurrency investors say they support the regulation of the market, while less than 1 in 5 say they oppose it. Many of these investors supporting crypto regulation believe that regulation will legitimize their investments, paving a path for more businesses to accept cryptocurrency as payment and encouraging more investors to join in on the market. At the same time, they believe that more regulation might help to add security and oversight to a currency that is often associated with illegal dealings and cybersecurity threats.

But regulation isn’t seen favorably across the board. Many investors, even some of those who understand the benefits of crypto regulation, simultaneously worry that the move may ruin the decentralized nature of the digital financial system.

But it may be inevitable

Despite the potential growth of their portfolios, this portion of the crypto community fears that regulation could fundamentally alter the nature of crypto they have come to enjoy most.

The biggest fear is the concern crypto regulation would result in more government surveillance, and well over one third of investors believe that regulation would reduce the privacy and anonymity that is unique to cryptocurrency when compared to other assets.

For investors, these concerns outweigh any benefits of crypto legitimization, but unfortunately the regulation train may have already left the station. In the U.S., the Biden Administration’s recent infrastructure plan has signalled that they’re working to impose regulations for the crypto community in the very near future, and the fact that they have already begun holding international summit’s taking aim at crypto suggest that governments may soon seal crypto’s fate on a global scale once and for all.

The nature of crypto is changing

So, is it right to conclude that crypto’s rapid growth since the start of the pandemic was the beginning of the end? In a way, the things that allowed crypto to grow unfettered has attracted the red tape it currently faces.

Crypto’s growth was fuelled by its deregulated nature. Compared to traditional finance, crypto was built for everyone, with a low cost of entry, and a lack of middle men. But that lack of regulation, which allowed its growth to balloon, also caught the eyes of traditional financial institutions who saw the deregulation as a way to compound their growth.

Whatever the future holds for cryptocurrency, it’s clear that the second decade of crypto will be entirely unlike the first.

Doug Gorman is Insights Analyst with GWI, a leading audience targeting company for the global marketing industry.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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