It is pretty safe to say that from the regulation perspective, we have not received any favorable outcome when it comes to cryptocurrencies. The recent application for the Bitcoin ETF (Exchange Traded Fund) from Bitwise was rejected again by the SEC. Remember, investors have been waiting for a long time now for this type of regulated ETF to see the day daylight. Historically speaking, ETFs bring liquidity because it gives the average investor to be part of a regulated investment opportunity. Unfortunately, there is still no light at the end of this tunnel.
However, it is not all gloomy. The recent joint statement published by the three most important departments in the United States; the CFTC, the FinCEN and the SEC further shows that regulators are displaying a united front to untie any loose ends with respect to the AML and manipulative activities- the biggest challenges.
One needs to look at this from an optimistic lense: if the three major departments have started to combat the same important areas together then it means we are one step closer to our destiny. No one wants the new technology to continue to face hurdles because of the regulatory. I believe the united front by theses three authorities is positive for the crypto space, they should be able to state their concerns about Bitcoin and other cryptos. And one done, entrepreneurs can address those obstacles rapidly.
Delaying the process due to the lack of regulatory clarity and under compliance from the product providers create unnecessary headwinds for new innovations. In addition to this, it puts the US on the verge of losing the innovation crown.
Jurisdictions like Switzerland are famous places for companies who want to resolve real-world problems with real solutions. Some of those solutions are creating liquidity out of illiquid markets. For instance, timber is an illiquid market, you can’t easily plant trees and sell them. This is where the illiquidity trap is. In addition to this, to resolve this matter while maintaining the social aspects such as a green environment, and add value for the community by creating jobs is another act which requires transparency. Companies like, Global Tree Project AG with their project Tree Coin, a reforestation project in Paraguay, sits at the heart of this. By being under the umbrella of the Swiss authority, they created a mechanism to build trust and unlock illiquidity.
The important element here is the choice of jurisdiction. Switzerland, apart from its stable reputation, provides a clear definition for legal landscape for businesses: they know what they can do, and what they are restricted to do. On the other hand, the SEC has been criticized many times for being vague and not providing enough information for entrepreneurs to have their boundaries. Remember, in September this year, the US Congress sent a letter to the head of the SEC department, Jay Clayton to urge him to provide clear guidance.
To conclude, the risk is just too big: without the US fully on board, you cannot have mass adoption. However, I am optimistic that the combined effort by the three most important departments over in the US is going to establish a clear, concise framework which can open up the doors for entrepreneurs to raise capital that they seek, but also keep the US as a hub of innovation.