Someone once asked, “what gives a government the right to regulate cryptocurrency?” I had to inform them that because of one word: infrastructure.
Though crypto is being beamed all over the web, it has to go through wires and other technological parts that sit on land. The government has sovereign reign over all earth and the friendly skies.
Indirectly this is what gives the SEC’s powers to reject every effort to launch a Bitcoin ETF. The battle to normalize crypto assets is in front of the minds of investors looking to cash in big.
In our opinion the crypto investing world has two options:
crypto asset custodians will be tightly regulated and be required to synergize with conventional financial institutions infrastructure
crypto ETFs have to be designed to contain actual crypto assets that investors can hold in their accounts, which will be administered through big banks anyway
This very need has opened the door for Stablecoin creation. The blessed first love of Crypto Hedge funds and ICOs alike. Stablecoin is the newest weapon in the crypto economy war chest.
To put things into perspective, if virtual currencies are pegged to a physical one ( US dollar, Euros, Yuan), then it can be used to buy and sell goods and services while protecting against volatility.
Also, stablecoin can benefit the investors by taking away the dreaded capital gains side of using crypto to purchase anything. The adoption of stablecoin within the mainstream will give it the green light to work as an accepted unit of account in which other assets are traded.
THE ISSUES
The real problem for the SEC is how volatile crypto assets are opposed to occasional recessions and market crash in traditional investment assets (stocks, currencies, derivatives). If these coins can lessen its market swings, regulators will become more lenient and approve various financial products to come to market.
Let me try to be an economic non-techy that speaks techspeak for a second. The relationship between digital and physical financial instruments is an automated global banking equation that has the complexed task of stabilizing price parity, being backed by paper assets, which has to diminish the act of being used for fraud. If this is possible, then governments might welcome crypto with open arms.
Stablecoins have to potentially outpace decentralized coins and become widely adopted to achieve its goal. The other side of the coin is, if it grows then it will become direct competition to the US dollar in the battle for monetary dominance, thank you season three of Mr. Robot!
FINAL THOUGHTS
The probability of a central government allowing a non-government entity to service the dollar in any way is improbable…until it isn’t. Who knows, maybe a central bank issued coin is still on the horizon?
While the cryptocurrency economy battle for its rightful place in the financial world, there are still ways to monetize off of this race to economic legitimacy. For more info click here