Resistance to Acceptance: When will traditional finance welcome Crypto?
The answer is… Sooner than you may think. Cryptocurrencies are already accepted at 11,000 brick and mortar stores. Yes, we could put the extreme crashes and volatility down to governmental and institutional resistance which causes low liquidity and, hence, higher volatility, but if traditional financial institutions are terrified that FinTech will revolutionise finance and leave them behind, then we can also be certain that blockchain technology can offer them a solution.
The Current State of Affairs
The simple fact is, a deregulated market means unaccounted funds. And any large-scale anonymous payment system impedes the ability to collect taxes or tackle illegal activity. However, we know two things that are immutable. First, the institutions by which traditional finance is built are not going away. Secondly, even with intense Government pressure, it would be impossible to completely stop the crypto wave. Both are at loggerheads now and a compromise is required. Regulation is that solution.
Following on from the Mt Gox hack in 2014 and the Coincheck breach last year, Japan revised their ‘Payment Services Act’ to legalise cryptocurrencies as a means of financial settlement. Now requiring all virtual currency exchanges to register and submit annual reports, the intent is to prevent unregulated exchanges from mishandling funds and operating weak ‘Know Your Customer’ (KYC) and ‘Anti-Money Laundering’ (AML) protocols. Through this we are seeing traditional financiers like the Japanese investment group, JIT Holdings, implementing such services where citizens can purchase real estate with the cryptocurrency Monacoin.
The Good, The Bad, The Regulation
This, we could say, is one small step for crypto and one giant leap of faith from the Japanese government. Still, international institutions look on with suspicious eyes because the question remains: how do we prevent over-regulation that could stifle an embryonic industry with amazing potential but still maintain a level of security for investors? Luckily the FinTech community can pool from the best minds in both the finance and tech world and explore the depth of potential in blockchain solutions.
One such solution is blockchain identity management. By preventing identity fraud and streamlining KYC and AML procedures, wallet holders can be registered and marked. Civic, a leading decentralised identity platform, works hard at protecting and authorising the use of identity in real-time. So traditional finance is now recognising that crypto does self-regulate, in a way. As long as importance is given to the protection of our privacy and security, then regulation (of the good kind) will be accepted by the community. The sooner the world welcomes Crypto, the sooner our financial institutions can resume business as normal.
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