What does the future hold? – Forbes Advisor UK

To get a snapshot of the cryptocurrency market from an insider’s perspective, we sat down with Matt SmithCEO of compliance tech and data analysis firm SteelEyeto make his views on government involvement, regulation and the potential of bitcoin and other tokens a recognized means of exchange

Q Since the government announced that it wants to make the UK a “global hub” for crypto-technology back in April, what development have you seen?

In fact, since the Chancellor announced his intention to make the UK a “global hub for cryptocurrency technology”, there has been no major development.

While it may mean the government’s appetite to become an attractive place for cryptocurrency companies to operate, the lack of detail around the proposals – more specifically around the revolution and how it will protect the British economy – is a gap that needs to be addressed.

Q How does this enthusiasm correspond to the lack of regulation and Finanstilsynet’s strong and repeated warnings about crypto in general?

The initiative is seen at arm’s length by the FCA, with board chairman Charles Randell warning against hasty regulation.

As is the case with most international regulators, the FCA still makes sense of the decentralized market and how it works. Unlike other financial markets, with crypto, there is no central oversight – jurisdictions try to regulate independently for something that is inherently global, so there is no clear approach.

To date, much of the incipient regulation of digital assets has focused on money laundering, counter-terrorism financing and knowledge of your customers, and although it is seen by many as a necessary first step, it has led to many other important elements yet is not adequately addressed.

For example, the FCA does not yet know whether they want to treat crypto as a currency or commodity. The crypto industry would certainly like to be grouped with FX, but regulators generally do not want to give it that level of credibility, or at least not yet, at least.

Over time, we will see regulation come into force, and although there are arguments that a new definition is needed, given the regulators’ rare nature and the vested interests involved, the incentives for each regulator are to adapt digital assets in a framework that they are comfortable with. taken from existing financial legislation.

Q Will we see a lightning bolt of all-encompassing cryptoregulation come out of the blue?

No. For cryptocurrencies to be credible in a global, normalized economy, regulation is needed – you cannot have a financial market without laws. However, there is no immediate urge from regulators to “rush” into regulating crypto.

The FCA has called for caution, and we know from previous experience that rushing in without full understanding means that regulation either fails or stifles the normal economic flow of markets.

Some of the more forward-looking stock exchanges in North America and the United States are self-regulating to stop market manipulation and economic crime. Regulators have a lot to learn from them. By starting to impose regulation in stages, the understanding and supervision will be improved in each stage, which in turn will lead to more credibility in the market.

Question Does crypto start and end effectively with bitcoin?

Absolutely not. Not only are there thousands of different cryptocurrencies, but this world goes beyond the crypto itself. There are other digital asset classes and applications of this technology – just look at the explosion of NFTs.

We now see that financial institutions are digitizing guarantees, becoming managers of digital assets on behalf of their customers, and that brings credibility to the market.

We can trace the history of digital assets and currencies, which means that these digital markets are not the dark world many people think they are.

Especially as these markets are regulated, and as established financial institutions begin to invest in how they hold digital assets, there will be much more clarity – it will no longer be seen as the dark abdomen of the web, but as an increasingly credible part of the global economy.

Q Should investors buy dip?

The market is currently extremely volatile. By nature, because with digital currencies there are no physical assets, there is nothing to support the market.

Other markets have normalized drivers, and conversely, the price of crypto can be driven by almost anything – macro policy, geopolitics, macroeconomics, misinformation, real information.

When it comes to whether investors should buy dip or not – as with any investment, it depends on the investor’s risk profile and understanding of the market.

Question Should we be concerned about the environmental impact of crypto mining?

What we should be most concerned about is the environmental impact of our new digitalized world as a whole – it goes beyond digital currencies and crypto markets.

The more we exist online – shopping, dating, socializing, etc. – the greater the demand for data storage, and because data mining and data centers all have a carbon impact, this effect will only increase.

Infrastructure providers need to think about how they can optimize to become more environmentally friendly and how they can use resources to tackle this growing problem – which certainly also applies to crypto.

Q Will crypto ever be a widespread medium of exchange instead of a speculative investment?

Only time will tell, but you can certainly not force it. For example, in September, El Salvador became the first country to make bitcoin a legal tender, spending millions of dollars on creating and promoting the bitcoin infrastructure, but the experiment has been seen as a major failure with the country’s 2300 bitcoins now worth half. of what the state paid for them.

For cryptocurrencies to be accepted as mainstream, they must become more credible, and this will only happen when they are regulated, and when global financial institutions are safe enough to trade without looking at them as an inherent risk to their business.

Q What will the crypto market look like in 12 months and in 5 years?

Over the next 12 months we will see a small development, but a year is not long enough to see any major change.

Over the next five years, I will be disappointed if global regulators have not figured out how to regulate these markets in a credible way.

There are currently a large number of currencies and platforms, and as the market matures and regulation begins to take effect, we will end up with a handful of platforms that will be the winners in this race – the rest will simply be betting shops.