Banker Predicts More Regulations Means More Institutional Crypto Investors Entering Space
An ex-Standard Chartered executive, Daniel Santos has said that the more positive regulations come into the crypto market, the likelihood there would be an increased investment from established investment companies.
The crypto market is currently experiencing a decline and Santos thinks regulations can make a difference. Specifically, Santos predicts it will attract more institutions into the crypto market.
In 2014 anticipations were rife that the crypto market will attract large institutional investors such as pensions, hedge funds, and endowments to allocate a small portion of their portfolios in the cryptocurrency asset class.
But the lack of custodian solutions and institutional products have prevented institutions from investing in the market.
Santos reiterated that regulatory opacity in the market contributed to the skepticism towards the asset class from institutional investors, as investing in assets that could be considered as unregistered securities could lead to serious compliance-related issues with the US Securities and Exchange Commission (SEC).
The SEC only clarified that Bitcoin and Ethereum are not considered as securities under existing regulations in mid-2018.
As such, Santos explained that continuous imposition of positive regulatory frameworks in the global cryptocurrency market could allow the asset class to attract an increasing number of institutions in the months to come.
“The most powerful force to reverse such negative sentiment would be market regulation. If the crypto market is ever to establish itself as a credible alternative asset class, it will need a set of rules that will weed out the fraudulent activity and encourage stable growth, which should attract the deep pockets of institutional investors.”
Elsewhere, the world’s fourth-largest asset manager Fidelity Investments introduced a cryptocurrency custodian solution.
The unforeseen decision of the firm to enter the cryptocurrency market provided two crucial hints regarding the mid-term growth of the market: there exists significant demand from institutions and regulators have acknowledged major digital assets as alternative stores of value.
Ripple Labs executive Ryan Zagone stated that the days of protecting cryptocurrencies as anonymous assets structured to circumvent regulations are over. He explained that regulation has to be established to facilitate the growth of the industry and the philosophy of dismissing the authorities and regulatory frameworks is immature.
“Regulation is, in fact, a betrayal of the origins of Bitcoin, which was built around anonymity and skirting government oversight. This philosophy is unrealistic and immature.”