The Crypto Landscape Is About To Change Forever – Here Are 5 Things Investors Need To Know
It should come as no surprise that inflation is upon us. Covid lockdowns led to slow economic growth. This in turn led to extremely high levels of money printing around the world. As money printing increased, investors turned to various asset classes as a way to protect their dollar value.
We’ve seen housing prices skyrocket, the stock market soar, and the price of Bitcoin increase by nearly 1000% in under a year, if we look at its peak just a few months ago. It’s clear that inflation will continue to affect the value of the dollar, and as such, investors will continue to look for ways to protect themselves against inflation. Cryptocurrency is quickly becoming one of the leading vehicles to do so.
This has not gone unnoticed. Governments are now implementing regulations on cryptocurrency exchanges across the world, resulting in a crypto landscape shift unlike any other.
Here are five things investors need to know.
Regulation Will Start With The Exchanges
Exchanges are the on and off-ramps of the cryptocurrency world. To invest in the industry, you as an investor must move fiat currency into the cryptocurrency world. When you decide to sell your crypto, the only way to translate those profits into the real world (currently) is to withdraw your profits via an exchange.
Thus governments are looking to regulate these entry and exit points first. Regulation of cryptocurrency exchanges means that governments will look to do the following:
• Tighten security for new investors
• Lower the risk of financial ruin for new investors
• Ensure exchanges have adequate KYC (Know Your Customer) practices to help reduce money laundering and the threat of terrorism
• Ensure exchanges are collecting transactional data to help reduce money laundering and the threat of terrorism
Crypto investors who are familiar with platforms such as Coinbase or Binance have already seen the former increase their requests for KYC data, and the latter withdraw services from US and Canadian customers in jurisdictions where regulation is necessary.
This trend will continue to accelerate.
Exchanges Will Withdraw Services From Regulated Jurisdictions
Undergoing the regulatory process in any country is a time-consuming process. It takes a lot of work, effort, capital, and cooperation with government officials.
This is coming from our experience working with Canadian regulators. While Coinberry is at the final stages of its regulatory approval in Canada, the journey has taken +2-years and has required substantial work.
This is not something that all exchanges will opt to undertake. Besides the cost and effort involved in obtaining regulatory approvals, the time it takes to become approved will range from 1-3 years, depending on the jurisdiction.
Fearing the ‘strong arm of the government’, exchanges who cannot afford to obtain regulation, or who are just starting the regulatory process will look at withdrawing services from users in those areas. These may be temporary, a withdrawal might happen for only the initial period of approval. Or they might be permanent.
Crypto Financial Products Like Leveraged Trading, DeFi, or Others Will Likely Be Restricted
As regulation starts to roll out over the next 2-8 months, investors should expect to see a change in access to popular trading products like:
• Leveraged trading
• Options trading
• Alt Coins
This will be done in an effort to maintain compliance with government regulations. It’s worthwhile noting that exchanges already perform these actions. Altcoins are restricted on most platforms. DeFi is also restricted depending on the exchange you interact with. Leveraged trading and options are only available on a small number of exchanges.
As government regulations start, investors should expect to see initial restrictions on the above, followed by more product and service offerings as the regulatory framework shifts.
Individual Crypto Products Will Soon Follow The Regulatory Process
Although exchanges are the first in line to experience the regulatory process, investors should be mindful that the regulation of individual crypto products and services will not be far behind.
A case in point would be the SEC suing Ripple. While an initial win is a positive scenario for the team, the fact that the government has singled out, targeted and sued an individual crypto company speaks to the potential future we are likely to see.
Exchanges are but the quickest and easiest ways to regulate access to the crypto markets, but it is almost certainly not the last step. Once a full rollout of exchange regulations takes place, investors should expect to see further regulatory practice instituted on individual crypto companies.
Investors Will Need To Secure Regulated Access To Markets
Moving forward, should an investor find themselves in a regulated jurisdiction, they will need to think about how to access cryptocurrency markets through regulated exchanges. This is going to be mandatory.
As mentioned above, Coinberry is one of the first platforms in Canada to undergo the regulatory process and is at the tail end of the process, but there are other platforms in the market that have started or are in the midst of doing the same.
Regardless of your platform preference, investors should consider the following:
1. Is your favorite exchange already regulated in your country?
2. Where in the regulatory process is your exchange? Have they just begun? Are they in the middle? Or are they finalizing the details? Remember, regulation will take an estimated 1.5-3 years to complete.
Additionally, investors will want to ensure they have a transfer plan to move or switch to an exchange that is regulatory compliant in their jurisdiction.
1. Going through KYC and all necessary verification on the target exchange of choice
2. Consider having cold storage to enable both security and flexibility in terms of moving crypto assets between exchanges.
The market is full of opportunity, and not having access to cryptocurrency simply won’t be an option for smart crypto investors. Although the landscape is shifting, there are exchange options in various jurisdictions that are able to provide investors with regulated access to the markets they need. The question is, are you on a platform that can give you that access?
Author: Andrei Poliakov is the CEO and Co-Founder of Coinberry, one of Canada’s premier digital currency platforms. He led Coinberry to become the first in Canada to partner with a Government Municipality and become one of the earliest platforms in the country to undergo Canadian crypto-exchange regulation. He helps others understand cryptocurrency trends, gain technical insights, and overcome common misconceptions about the cryptocurrency industry. Andrei believes in pushing the boundaries of the status quo, and is passionate about inspiring blockchain adoption through education.