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While 2017 was hailed as one of the most impressive bull markets in the short history of cryptocurrencies, 2018 saw the proverbial rocket return to Earth.
The year was partly defined by the increasing control by the regulatory authorities of the crypto and blockchain industries. Both private and public institutional entities helped to pump the brakes of the cryptocurrency trend, which they had largely not been able to do in previous years. However, the regulations also help define the path to cryptocurrency in the future – and it is optimistic.
The coming year should see some trends in cryptography that offer a more rosy target through which to visualize the market, when compared with 2018. These are some of the biggest regulatory parameters and trends to look for in the coming year.
Future Bitcoins take the next step
The cryptocurrency futures products already exist in the form of Bitcoin contracts offered by both the CBOE and CME exchanges, but they have not given the market boost that many had hoped for. The original news that these exchanges had managed to regulate BTC derivatives were considered super-optimistic by the cryptocurrency trade publications.
Instead, the development of futures has probably been added to the downside because all forward products are currently settled in cash, not in Bitcoin or in another cryptocurrency. The trading volume of derivatives does not directly affect the trading volume of Bitcoins because there is no real Bitcoin bought or sold until futures are exercised or actually converted into Bitcoins. Futures are also a double-edged sword for bulls because they offer traders more liquidity for both long and short transactions.
Roni Berkowitz, responsible for the financial and technological regulation of the law firm Porat of Tel-Aviv, said that other suppliers of forward contracts will arrive. "The major exchanges such as Bakkt and NASDAQ are preparing to open term contracts offer a new service with new implications," he explained in an e-mail.
Bakkt, owned by Intercontinental Exchange – which also owns the NYSE – is a futures trading and deposit platform for encrypted contracts that are regulated in Bitcoin itself, but has been delayed. Many expected that the exchange would start in the fourth quarter of 2018, but now the date has been set for the second half of 2019. The delay is likely because regulators are still trying to understand the implications of encryption contracts with physical data support complex problems, such as coins guaranteed with a private key.
Universal application of anti-crime laws
Some parts of the status quo are not flexible and require some compromise, which justify the general rules on all cryptocurrency projects regardless of their purpose or usefulness. The ability to conduct transactions globally has made cryptocurrency a useful tool for criminals and terrorists, unfortunately, calling for the adoption of a comprehensive fight against money laundering (LMA) and the fight against terrorist financing laws ( CFT). The control group responsible for regulation and the application of the rules arriving in 2019 is the FATF (Financial Action Task Force) based in Paris.
Announced on October 19, 2018, all companies in the G7 group of 37 countries will be subject to the new FATF regulations, which plans to have the new standards in order by June 2019. In addition, the group may also impose limits on trade and cooperation with countries that do not maintain the same AML and CFT rules in their cryptographic sectors.
The United States has created similar laws more than five years ago, but one of the reasons for the new laws in Europe was that, after the 2015 terrorist attacks in Paris, regulators realized that they could happen again if anonymous virtual currencies they were not braked. While most companies in these countries comply with the rules, the new regulations could preclude the existence of some private currencies such as Monero, which is particularly useful for illicit purposes due to its opacity to the ordering forces.
ICOs are sorted
The answer to initial coin offerings (ICO) – a controversial method of crowdfunding a company through cryptocurrency – has been an international jumble, with countries like China that have undertaken a total ban and others like Singapore or Malta that they use ICOs to increase the flow of digital money in their economies. However, there is no synchronized regulation effort between countries, and given the boundless nature of the blockchain, it is still possible to cheat someone from their cryptocurrency investment.
International regulations are important and can protect consumers, but it is hard to ignore how advantageous ICOs currently are for small businesses. Regulators want to encourage new compliant ICOs to be started, but it is difficult if these small projects have to meet the current asset classifications.
Many would currently be labeled as securities, which are rigorously regulated and expensive enough to prevent most ICOs from happening otherwise. This is why the authorities are introducing new legislation for revision, such as the bill proposed by US representative Warren Davidson, which seeks to create a new class of activity for cryptocurrencies.
Until then, experts such as Guido Schmitz-Krummacher, a blockchain lawyer and crypto-consultant, recommend that an inclusive regulatory approach be adopted: For companies that pursue the blockchain fundraising model, they recommend hiring that tokens will be rigorously regulated as existing assets.
"Products and applications in the blockchain ecosystem will become increasingly complex"
He said. "Therefore, establishing the right internal regulation strategy can save a lot of money and guarantee the longevity of your project."
Security token offers begin to be acquired
Given the indications of regulatory authorities that certain tokens could be considered securities, a new idea is to create tokens that are expressly titles, as a way to bring the effectiveness and utility of blockchain to old financial products. like stocks, raw materials and real estate. It is already happening in applications such as "Rally Rd.", Which emphasizes equity in vintage cars and allows users to invest in shares that represent them. Another example is "LAToken", one of the first emerging stock exchanges that makes assets tradable as real estate in cryptocurrency.
The issuance of countless zero-overhead tokens means almost infinite friction and better liquidity for any asset class, but also greater accessibility to retail investors who may not have enough money to participate properly in them.
The law firm Herzog, Fox and Neeman partner Roni Cohen Pavon sees this recognition as part of a broader trend, which will gain momentum as the regulatory influence grows.
"While we are witnessing an increase in security tokens and their purpose as a fund-raising method, we will also assist regulatory authorities starting to grant trading licenses that provide liquidity to these assets, finally giving them a real advantage", says Pavon. "I also believe we will see more regulators trying to add confidence to semi-bank services such as custody encryption and payment processing, which ultimately makes the retail investor and consumer experience. better, "he added.
Some potential drawbacks are that the process of issuing a security token is still largely hampered by the costs and time that must be spent on full regulation (or an exemption) by the SEC. This implies passing Howey's test to determine if an investment qualifies as security, find accredited investors and endure endless costs and paperwork.
However, there are a growing number of security token (STO) platforms that boast compliance and help companies accelerate the launch process, which means that the slow eclipse of ICOs by STOs may continue to occur in 2019.
Greater validation of digital resources
Companies and institutions such as Santander Bank, IBM, Maersk, Intercontinental Exchange and countless other people have understood how digital tokens can grow their profits, with transparency and better and cheaper transactions, and new features that enhance customer relationships.
With Bakkt signing both Microsoft and Starbucks, who will use the platform to release their inter-ecosystem tokens, the world will soon see a variety of token-supported services such as rewards and in-game purchases programs on popular websites and applications.
Even Facebook is considering its cryptocurrency, a sign that the cryptocurrency – in one form or the other – is bound to remain.
