If you will look at the design of Bitcoin and other cryptocurrencies made after it, you will see that its purpose is to get rid of third parties that confirm transactions. And its mere existence means that it could potentially get rid of central banks and governments. And for this reason, it wasn’t surprising why some central banks and governments even banned cryptocurrency-related activities such as the case in China.
However, things are slowly changing. There are institutional investors that are looking to get involved in the market. And you can blame the popularity of the digital assets for this. But is it really disruptive? Recently, representatives of the German Federal Government mentioned that cryptocurrencies do not pose a threat to financial stability.
Volume is Too Low
The Federal Government mentioned that the volume of the cryptocurrency transactions is still too low in order to be considered a threat to the global financial system. However, they are still monitoring the developments within the niche. The German government is sharing this opinion with other G20 countries.
And also, the government also answered the potential problems that can be brought by cryptocurrencies. The problems included the possibility of digital currencies being used for money laundering, tax evasion, illegal revenue, and even funding terrorist activities. The government mentioned that “In order to address the risks of Bitcoin and other cryptocurrencies, there are already important regulations in Germany: for example, German-based crypto traders must follow the same anti-money laundering regulations as other financial service providers- especially when it comes to identifying customers”.
Though Bitcoin and other cryptocurrency prices are down, it is true that the industry is inching closer towards better regulations. In fact, SEC chairman Jay Clayton clarified that ICOs can be considered as a security while cryptocurrencies can be used as an alternative to fiat currency. And also, you have those regulators that are now looking to eliminate crypto-based companies that are running a scam.
Lithuania recently released its rules and regulation regarding ICO tokens echoing what Jay Clayton says. And these are good steps towards regulatory clarity in Europe and in different parts of the world.
You also have the likes of Coinbase that is now working hand in hand with SEC in order to obtain its license. In fact, Coinbase is also trying to enter Japan’s crypto-space and is now working with different regulators as well.
German government even emphasized the importance of international controls when it comes to the crypto industry. It says that “Rather, there is a need for coordinated action at European and international level. The Federal government is, therefore, pressing for a harmonized handling of crypto-tokens at this both levels”.
The IMF is on the same page as the German government as it also doesn’t see cryptocurrencies as a threat to the stability of global finance. Given the same opinion, are we soon seeing the growth of cryptocurrencies at least in Europe?
The reality is, though Bitcoin and other cryptos are currently down, many experts have remained optimistic regarding the long-term forecast of cryptocurrencies. Could there really be a bull run soon?