Crypto – Introduction
Today, the crypto market has evolved from a Modest footprint to a 1.79 trillion market cap industry. There are clear winners, at least as at this stage – Bitcoin, Ethereum, Tether, Binance coin, and Cardano making up the bulk of the 1.7 trillion market cap, and there are others who make up the numbers. Between Bitcoin, Ethereum and Tether, and even Binance, they roughly make up close to about 1.3 trillion of the 1.79 trillion market base.
What has been the conspicuous and very noticeable feature is the variability as well as market gyrations in the currency markets. In one day, the volatility can be 30% another day it can be 40%, it can be 20%, but the market volatility has been the most important feature of the evolution of crypto currencies. There’s been also several adjacent products such as Lending, Trading, abridged currency funds which blend, various kinds one has witnessed in varying degrees.
Janet Yellen has indicated that it’s time the cryptos are brought under the purview of the mainstream and they are taxed. Trades and transactions to be taxed.
Unregulated Market
The market is not regulated. The market is still evolving. But everybody has now recognized the need for making this go mainstream. Four important players have emerged in this game. The first person to throw the hat in the ring is the US Treasury secretary Janet Yellen. She has indicated that it’s time the cryptos are brought under the purview of mainstream and they are taxed. Trades and transactions to be taxed.[1]
In fact, in the US infrastructure stimulus program, there is a 28 billion dollars tax provisioned for collection from crypto transactions to pay for the infrastructure[2]. So, that’s the first cab off the rank.
The second cab of the rank is many financial institutions and the most recent entrant being J P Morgan coming to the market and to offer crypto products and retail it initially to their high net worth accredited customers[3]. And these are customers who have a minimum investable balance of 1 million dollars. So, they have announced a couple of products.
Goldman was the other institution that has offered. And when you go around the world, you see products in Australia, Singapore, and Europe. So, there are varying levels of products that are coming into the market retail through established and non-established financial institutions. The established financial institutions take care of the Fiat, can take care of the custodian, can take care of the to some extent, the regulation part of it whatever is within the purview but there have also been unregulated players creating fraud and hegemony in the system.
The third in most recent days Gary Gensler, the SEC chairman has issued a statement and he also addressed the Aspen security conference where he is indicated. He is thoughtful, he’s very knowledgeable and he’s prepared to regulate the industry to eliminate the fraud and bring in some discipline into this activity and make sure that it is compliant and working for the guidelines of all other instruments which trade in the market. He has asked Congress to give him the approval.[4]
Monetary Authority of Singapore
Around the same time, Singapore also announced the monetary authority of Singapore is looking at various players and working to grant a license to establish their footprint in Singapore for exchange and clearing services for crypto. This will also see some discipline and much more orchestrated growth in the market. So, this is the other event.
Now, banks have also come out at least in the United States through an entity called NYDIG, which is a venture group. And if I’m correct, Fidelity Information Services, as the tech platform provider to retail, allows customers to come to the branches and buy crypto and loaded it into the wallet. These schemes have given an impetus to what has remained an unregulated market, but still a fairly expansive and successful market, you know, two trillion dollars is not insignificant. It’s a very sizable market.
Given the impetus for a much more harmonious evolution of the market, both in Singapore and the United States ETF players, namely Exchange-Traded Funds, ETFs players have also evinced interest and have expressed a desire to offer ETF on the back of the crypto platforms or crypto currencies.
This is another positive sign, nothing is approved as yet, but I’m sure that if regulatory purview is going to be one of the mandates, formal taxation of trades and transactions looks almost inevitable. Then, it’s only a matter of time before ETFs come into play.
In Conclusion…
So, to conclude crypto is here. It’s going mainstream. It will have regulation; it will be taxed. The oversight gives the opportunity to drive fraudsters to the extent possible out and create a more sustainable marketplace. Having said that volatility has been the underpinning epitome of the growth of the crypto, so one will continue to see the volatility and eventually, things will stabilize as the market evolves and there is a defined set of marketplaces. There are also the Sovereign funds and the government getting into the game. They’re still in the evolutionary phase, but enough governments are making noises with an intent that they can delink themselves from any currency be Euro, the US that have an independent structure path. All augers well. So, I see crypto to be a hero.
Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
References:
[1] CRYPTOCURRENCY Treasury’s Janet Yellen Presses For Stablecoin Regulations– Jul 20, 2021, Pymnts
[2] Infrastructure Bill Advances in Senate, Crypto Amendments Await Vote– Aug 07, 2021, Blockworks
[3] J.P. Morgan Opens Crypto Fund Access to All Wealth Clients – Jul 26, 2021, Finews
[4] The SEC needs more power from Congress to fully regulate crypto, Chair Gensler says – Aug 04, 2021, CNBC
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