“We are a big student of Blockchain”
– BlackRock CEO Larry Fink
At long last – and if you are a crypto enthusiast (who is not), that is what you would feel about the developments of the last few weeks. Three key events have happened this month, and that has lifted the mood around the crypto community. Even amongst the naysayers of cryptos, there is a definite change in attitude and mindset more importantly.
Bitcoin gained and gained and shot past the $7000 mark and has stayed there relatively comfortably.
There were three big events in my opinion that unraveled this month.
- Blackrock CEO who previously called Bitcoin an index of Money Laundering, in his interview with Reuters mentioned that they had a working group to study cryptos.
- The US Congress discussed cryptos and the need to regulate them with a view to leveraging the benefits of tokenisation.
- The FCA announced its fourth cohort for the FCA Sandbox. Out of the 29 chosen firms, 11 of them were DLT firms. While this may not be a market mover like the other two events, it sets the tone for regulators across the world.
This was inevitable. Governments, institutional investors and top regulators had to get their heads around this phenomenon, and get out of their denial mindset when it came to cryptos.
I am particularly surprised at the tone of the discussion at the US Congress, it was more amicable to cryptos than most people expected. Andrew Rossow published an impressive gist of the discussion at the congress in his Forbes article.
The US regulators have so far been nothing but hostile to cryptos and ICOs. For a nation that has always been at the forefront of innovation, this has been disappointing. An innovative trend or technology is like a kid trying to find its feet in the world, and with kids, some of them are naughty, and the crypto world has had its share of naughtiness. Thanks to the loopholes and the greed.
But so has the Wall Street – even as an adult it had serious flaws and allowed greed. But the regulators were more tolerant then. However, they have at long last seen the potential of the prodigy child – Cryptos.
Some key takeaways for me from Andrew’s summary on the Congress hearing are,
- They are keen to use this opportunity to redefine what a security is – and the new definition, or atleast the tweaked one, should take cryptos into consideration.
- Acknowledgement that this is a new era, where assets can be created, exchanged, and consumed in digital form. This is a big mindset change for all who are used to conventional valuation methodologies.
- Balancing value creation with consumer protection – this hints at a fair regulatory framework that sounds of pragmatism than the previous stance of the policy makers.
Now, if thats the stance of the US folks, we have better news across the atlantic – that we are ahead, as always. The FCA have already started to study crypto startups, to understand how to regulate them in a collaborative fashion. The FCA has built the so-called Fintech Bridges with Australia, Korea, Ontario and Singapore – and the approach the FCA takes typically inspires action across the bridge.
Some of the use cases the FCA Sandbox fourth cohort is looking into are,
- Regulated bonds using DLT
- Decentralised automated insurance for flight delays
- Issuing and Administration of debt and equity using DLT
- DLT platform that helps businesses raise capital
- Provide SMEs access to global capital using DLT
Largely focused on financing and the operational processes around that and pretty critical to the negative PR around ICOs. The need of the hour really.
With all these developments, it has never been more evident that cryptos are here to stay. Let’s embrace the revolution, enjoy it and make the most of it.
Arunkumar Krishnakumar is a Fintech thought leader and an investor.
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