With just over 10 years since Bitcoin came into existence in January 2009, a lot of the original hopes and dreams for cryptocurrency have not come to pass. Cryptocurrency is not yet widely accepted as a payment and transaction system.
Big banking is still going strong. Third party involvement is an absolute necessity for the overwhelming majority of financial transactions. Regulation is still a safety precaution that even the most ardent followers of Bitcoin are unwilling and unable to do without.
Yet, one benefit caught on almost immediately with cryptocurrency. Trading and investing in crypto quickly grabbed the attention of investors. This led to the proliferation of trading platforms, exchanges, and funds, with new exchanges like AMFEIX and older ones like Gemini reaping benefits.
All this trading activity leaves us with one question, why were fiat investors initially reluctant to get on board with cryptocurrency?
The volatility problem
Volatility has traditionally dissuaded many potential cryptocurrency market participants, particularly institutional investors.
In the United States, the Securities and Exchange Commission (SEC) has only been around since the 1929 stock market crash and subsequent Great Depression. This national crisis was a big enough disaster that even today, investors are influenced by the memories of the event.
For or against?
Somewhat ironically, one of the strongest supporters of United States cryptocurrency regulation through the SEC has been a cryptocurrency exchange. Gemini, founded by the Winklevoss twins, has been pushing hard to meet SEC regulatory standards. In fact, a couple of times a year, Cameron and Tyler Winklevoss attempt some sort of approval from the SEC.
For a while, their efforts were focused around garnering approval for a Bitcoin ETF. The ETF application was rejected twice.
Gemini’s most recent foray into regulatory approval is this week’s announcement of intent to apply for a broker-dealer license from the Financial Industry Regulatory Authority (FINRA). While Gemini is currently under official scrutiny from the New York Department of Financial Services (NYDFS), this new application would take its qualifications beyond the state level. However, FINRA, like the SEC, is notorious for its reluctance to approve such requests from blockchain platforms. In fact, over 40 applications are currently sitting at some stage of the process, with no approval to offer securities in the United States. This is in spite of the fact that crypto has been labeled a security by the SEC since 2017.
The SEC has reportedly been looking into cryptocurrency funds as well. Funds such as AMFEIX, the world’s first smart contract-based pseudo-anonymous blockchain trading fund, would be affected by this regulation of digital currencies.
AMFEIX is a solid platform. The website touches on almost every feature an experienced cryptocurrency trader might be looking for. The platform offers real time trading data. It claims scalability. There is a referral program, wherein traders can earn additional profits from new investments made by friends.
Even better, AMFEIX claims strict risk management safeguards are in place within its investment fund. According to the AMFEIX white paper, the fund is highly diversified, focusing on low risk pairs, while still maintaining a strong emphasis on the obvious pairing: BTC/USD. Additionally, funds that are not invested are stored securely in a multiple ledger cold wallet system.
After all this though, the real draw of AMFEIX is the pseudo anonymity claim. The platform does not require personal information in order to invest. If this pans out, it could be one of the biggest turnarounds toward Bitcoin’s original goals in recent history.
Yet AMFEIX is only one of over 220 cryptocurrency funds and $3.5 billion in combined assets that would be affected by this sort of regulation.
This could be a good thing for investors, at least in the short term. The SEC’s Customer Protection Rule, amongst other guidelines, are potentially ill-equipped to serve digital asset investors. Until blockchain security dreams become a reality, there is a real need for increased attention to this space.
Some are taking the same approach as Gemini, fully embracing the reality of regulation. Others, weary of the uncertainty, are simply choosing to quit providing services to residents of certain countries.
The United States is not the only government making it difficult for cryptocurrency ventures to operate within their borders. China has repeatedly attempted to block cryptocurrency trading and ICOs. The Chinese government is now tackling offshore platforms as well.
The reality is, nobody wants to lose a life savings on any sort of investment. Blockchain technology has not yet proven itself to be the secure, safe investment of its original claims. There is a need for regulation of investments. Time will only tell what that eventually looks like, and what the ramifications will be within the cryptocurrency market.