Should cryptocurrencies completely replace traditional finance, or should they evolve? Meltem Demirors appears to favor the latter option.
Cryptocurrencies arose from distrust of global governments and the public banking system. Satoshi Nakamoto introduced Bitcoin in 2008; since then, crypto has enabled the average person to control their financial well-being. However, the concept has evolved from an idea to a trillion-dollar ecosystem. As adoption grows, concerns about crypto best practices and investor protection become more prominent.
Nowhere to Hide
Following a series of global recessions, Bitcoin’s promise of a decentralized and peer-to-peer online payment framework drew much attention. Meltem Demirors was one of the early star-struck fans. Her first encounter with cryptocurrency occurred during her time at MIT’s business school. With a strong background in fintech startups, Demirors could easily connect with Bitcoin’s founder’s ideologies.
Demirors has since moved on to become the Chief Strategy Officer (CSO) of CoinShares, a European digital asset company. To her, Bitcoin and the larger crypto market are too important to ignore. This is correct, as Bitcoin led the emerging industry to a ‘watershed moment in 2021. The digital asset ecosystem reached $1 trillion in value and closed 2021 with an impressive $3 trillion, with Bitcoin reaching $69,000 in the process.
Despite significant retracements in the industry’s total value locked (TVL), too much emphasis has been placed on it. Regulatory pressure is increasing, and more users are joining the ecosystem. Because there is no uniform cover for cryptocurrencies, bad actors are slowly infiltrating and causing problems in the otherwise altruistic scheme.
In a Chain Reaction podcast, Demirors stated that Bitcoin and other blockchain-based assets require adoption to thrive in an environment dominated by centralized entities. Given this, collaborating with legacy-facing businesses is critical to its survival and long-term success.
Furthermore, regulation is becoming necessary with increasing cases of scam projects, fraud, and money laundering issues causing controversy. Tornado Cash, a crypto-tumbling website, is a classic example of a hotbed for cybercriminals looking to withdraw their illicit funds. The US government has since sanctioned all activities on the website. Users who violate this law face up to 30 years in prison.
Although Bitcoin’s ideology has a political undertone due to decentralized control, Demirors believes that lasting changes go beyond new technology. Realizing a truly decentralized financial ecosystem, she believes, will take time and a collaborative effort from institutions and governments. Furthermore, Bitcoin can only achieve its goal if users are properly educated. According to Demirors, cryptocurrency has not yet reached its peak and is still in transition.
Most Cryptos Are Securities: Gary Gensler
Since the advent of cryptocurrencies, the Securities and Exchange Commission (SEC), the top US financial regulator, has had its hands tied. A lack of clarity has made its job far more difficult than anticipated.
Since its breakout year in 2017, the US SEC has been paying close attention to cryptocurrencies, and efforts to weed out bad apples in the emerging industry stepped up in 2021. The SEC has so far subpoenaed several crypto companies(including some of the best trading platforms), with the Ripple case being one of the more well-known, and has repeatedly stated that it seeks to protect investors.
Despite his extensive experience as a lecturer on blockchain technology and cryptocurrencies at MIT, new SEC Chair Gary Gensler is following in the footsteps of his predecessors. According to the former professor, most cryptocurrencies are, by definition, securities. According to a recently released transcript of his speech for the US Senate Committee on Banking, Housing, and Urban Affairs hearing, Gensler stated that in light of this, all SEC staff have been working directly with blockchain entrepreneurs to register and regulate their tokens as securities.
Cryptocurrency exchanges are expected to follow suit.
Not only would crypto-related businesses require SEC approval to operate, but according to Gensler, businesses will soon be mandated to register with the Commodity Futures Trading Commission (CFTC).
With government control encroaching on cryptocurrencies, is the average person truly free?
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