Expert: Regulatory clarity would provide added impetus to crypto growth

    17 Apr 2022

    As crypto adoption continues to rise at unprecedented levels, Stephen Stonberg, CEO of cryptocurrency exchange Bittrex Global, sees the growth of the crypto sector as ‘too big to ignore’ for traditional financial institutions. Just regulatory clarity would provide added impetus to it, he suggests.

    Crypto adoption continues to rise at unprecedented levels, with expanding use cases allowing millions of people to earn, save and grow their wealth in new ways.

    Last year saw a stunning 880% rise in global crypto adoption, data from Chainalysis shows. This figure represents the ease with which traders and investors from Nigeria to the Philippines can quickly swap in and out of multiple crypto and fiat currencies.

    According to a report from Galaxy Digital, the venture capitalists invested over $33 billion in crypto and blockchain startups as the Web3 industry continues to heat up.

    Stonberg sees crypto adoption hasn’t just been limited to retail investors. Institutional investors continue to move into the crypto space as they look for high-growth investment opportunities for their clients. He noted that yields for US 10-year Treasuries, for example, have resulted in paltry investor returns of 1% throughout the past few years.

    Funds and publicly listed companies are beginning to invest in digital assets like Bitcoin and Ether, with both providing a greater return on investment than traditional safe-harbor assets like government bonds, even factoring in the inherent volatility of crypto markets, Stonberg highlighted.

    As per him, dollar stablecoins have also become an attractive asset, yielding investor returns of anywhere from 2%-12%. Some of the next-generation decentralized finance and emerging metaverse tokens represent a new frontier that is already attracting wide levels of investor interest.

    Even long-time skeptics in the banking industry have reversed their initial hesitation, with Goldman Sachs relaunching their crypto trading desk last year and JPMorgan continuing to experiment with their own digital asset, JPM Coin.

    As clients continue to demand exposure to this new high-growth asset class, more banks will offer varying degrees of crypto exposure to their clients. Morgan Stanley, for example, is already offering Bitcoin exposure to their high net worth and wealth management clients, while Goldman Sachs now regularly posts the prices of key benchmark digital assets for the larger institutional clients they serve. Bank of America has taken a particularly progressive approach to digital assets, launching crypto futures trading to select clients while referring to the $2tn combined market capitalization of the crypto industry as ‘too big to ignore.’

    The shifting attitudes of major financial actors combined with the launches of multiple Bitcoin exchange-traded funds and the sustained growth of institution-grade funds, like Grayscale, highlight that a new financial era is coming, Bittrex CEO notes.

    The key for the entire industry now Stonberg sees to continue this growth in 2022 and later.

    He noted that decentralized finance (DeFi) continues to attract surging levels of interest across the institutional landscape, while verticals like the metaverse and non-fungible tokens (NFTs) have also entered the mainstream, in turn catalyzing new participation within the crypto ecosystem.

    Experts continue to emphasize that regulatory clarity is the biggest hurdle, preventing more enterprises and institutions from greater involvement in the crypto arena. Fortunately, a broader, comprehensive regulatory framework is quickly coming into view in jurisdictions that contain sizable crypto markets – the US, European Union, and the United Arab Emirates.

    Stonberg suggests that any new regulations should strive to make participation in the crypto space as inclusive and accessible as possible, protecting traders, investors, and funds from scams while promoting and encouraging innovation.

    According to Stonberg, greater momentum surrounding crypto regulation and legislation will ultimately strengthen the shift, potentially spurring renewed levels of innovation throughout the space. An open, progressive approach toward technological innovation could provide a rising tide that lifts participants across the industry, he said.

    The institutionalization of the crypto industry finds itself at a critical inflection point in terms of growth, Bittrex Global CEO suggests. That’s why he proposes to focus on regulatory clarity and greater flows between traditional finance and the crypto ecosystem that could open up significant opportunities for growth and innovation.

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