5 Important Crypto Regulation Updates in 2020 That Every Investor Should Know About
Ever-changing regulations have been a common theme in the blockchain industry over the past decade.
However, the situation seems to be changing for the better now, with regulators finally reaching consensus on how cryptocurrencies should be regulated. Here are some of the key legislation updates to look out for in the rest of 2020.
1. A Growing Number of Crypto-Positive Regulations
More and more regulations proposed by governments and institutions today favor the adoption of crypto. There have been multiple bills put forward in the U.S. including the Blockchain Promotion Act of 2019, a policy that outlines the potential uses of the blockchain in government agencies.
Another prominent bill that received some attention earlier this year is the National Defense Authorization Act 2020. A section in the act explores blockchain applications for the U.S. military pending comprehensive research by the Department of Defense.
Financial-wise, the SEC demonstrated support towards the use of cryptocurrencies as real-world assets with its recent rulings. This could ease regulatory concerns for crypto trading in the U.S., which may stimulate capital inflow into crypto markets. FinCEN’s definition of stablecoins as money transmitters has also cleared various usability concerns, further edging cryptocurrencies closer to being used as viable currencies.
Similar bills have been suggested — some implemented — in the rest of the world. Of course, there are multiple hurdles to overcome, namely in security and privacy. However, there is a strong sentiment that regulators are starting to realize the benefits of blockchains and are actively looking at ways to integrate technology into society.
2. Increased Market Involvement
When fintech first disrupted the financial industry, institutions were quick to dismiss it as a fad. The state of financial services today has proved otherwise, with the industry expected to hit the $4.8 trillion mark in 2020. Cryptoassets may see a similar rise as powerhouses embrace the technology in their products — see Coinbase being accepted as Visa’s principal member for a recent example.
Banks today are competing to deliver faster, more accessible financial products to users all over the world. Not only will it enable global banking, but it will also be a valuable revenue stream as more individuals opt for fintech offerings over traditional bank services.
These factors make crypto the ideal investment for banks and retail investors alike. In fact, a study conducted by Charles Schwab discovered that millennials invested more in cryptocurrencies than any other stock including Netflix and Disney, further proving its popularity among the younger generation.
3. Transparency Will Play a Key Role in Encouraging Adoption
The decentralized nature of the blockchain may encourage adoption due to record transparency, a feature that eases AML/KYC compliance significantly. Financial audits and reports will be easier to work with as well since records are kept transparently and cannot be changed under any circumstances (immutability) — unless the blockchain is revoked or it’s an anonymous coin like Monero.
This feature has also led to the blockchain being adopted in areas like asset tracking where information needs to be updated and verified all the time. Users will be able to track the status of an asset from delivery to arrival with 100% accuracy and veracity. Other verticals that can benefit from a similar implementation include loans, procurement, and identity verification.
4. Emerging Markets Lead the Race In Embracing Cryptoassets
Emerging markets like South Africa and Malaysia are the most supportive in terms of embracing digital currencies, according to global research conducted by Luno. This is not a surprise considering many fintech solutions found success in developing countries before they made it big on the world stage.
Adopting radical technology like the blockchain will also spark curiosity and innovation among citizens who are exposed to it, especially among the younger generation. This, combined with the proactive approach taken by emerging markets in welcoming cryptoassets, may drive interest in developed countries to do the same should the technology prove itself.
5. Blockchain Monitoring Will Be Necessary
Despite its long list of benefits, regulators are still concerned over the use of cryptoassets in illicit activities. Last year, blockchain companies were urged to monitor their blockchains and produce completed, unaltered records to comply with KYC/AML requirements. Expect this to increase in frequency throughout the rest of 2020 and in the coming years.
The Financial Action Task Force (FATF) and several big-name regulators all over the world have already issued guidelines for how companies should monitor their blockchains. Not doing so carries the risk of millions in fines or worse, bans that prevent companies from operating in the regions defined by the issuer.
That said, it’s not all doom and gloom for blockchain businesses. By complying with monitoring guidelines, companies avoid potential crimes like theft and illegal financial activities, which is a nightmare both operation and reputation-wise. Multiple businesses have gone under due to heavy penalties and it’s in the best interest of organizations to step up to the task to avoid facing a similar fate.
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