Interest in cryptos remains high, but regulations are needed to usher in mass adoption
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(Kitco News) - The main story for cryptos in 2022 has been the severe pullback in prices from their November 2021 highs, with most tokens experiencing losses in excess of 90%. While many assume that the widespread collapse in value would render the asset class “hands off,” evidence on the ground suggests that interest in crypto is on the rise.
In a recent conversation between Kitco Crypto and Damian Scavo – CEO and founder of the stock, EFT, and crypto investment advising platform Streetbeat – the quant trader cited the rapid rise in Streetbeats customer base as evidence that interest in crypto remains high.
“We went from 100 customers to 100,000 customers in a matter of eight months,” Scavo told Kitco, giving the firm’s international support staff plenty of work to do.
Streetbeat specializes in quant trading, which Scavo prefers because it offers “systematic returns no matter the market conditions.”
On the recent rise in regulatory actions related to cryptocurrency, the CEO indicated that there is definitely a concerted effort by governments around the world to develop a regulatory framework for the asset class, but thinks it should be structured differently than it is for stocks.
“The starting point should be creating a framework around listing cryptos on the major stock markets. If we create that, and give both the exchanges and crypto ecosystem time to adapt, regulators can focus on the most important thing to regulate, which is the listing.”
Once cryptos are available on public exchanges and available to U.S. citizens, that will open the doors to adoption, Scavo suggested.
The CEO also sees the need for a task force dedicated to the crypto market that can adopt a framework that is similar to the stock market, but adapted to work with the crypto space.
“Cryptos are not stocks, but centralized exchanges are exchanges. So the exchange will be the piece where we need to focus our regulatory efforts on,” he said.
Exchanges will be responsible for doing the due diligence required before listing a token to ensure that its customers are protected. This will also require independent accounting firms that can verify any claims made.
“If we do this, then the customer is much safer. The customer can still lose money as they can lose money in the stock market.”
The quant trader highlighted the performance of Netflix stock in 2022, whose overall value has declined more than the total value lost in the implosion of Terra/Luna, to show that it's not just crypto that can cause investor losses. The only difference is that Netflix is regulated while crypto is not.
Overall, Scavo thinks that regulations would be beneficial for crypto’s as a whole and Streetbeat in particular, as it will allow the firm to create more products for its clients.
“Regulations would be beneficial for everyone because there are still a lot of unexplored opportunities in the market for cryptos to be used as investment tools.”
And cryptos are not just limited to being investment tools, Scavo said, calling blockchain technology “the real mission since it can be applied to sectors like factoring, invoicing, and international wire transfers – all will be moved to on a blockchain.”
In the future, instead of invoices being sent via email, they will be sent via smart contracts, he added.
|58% of institutions now hold crypto, up 6% from 2021 - Fidelity|
When it comes to regulating decentralized finance (DeFi), Scavo suggested taking an alternate route by establishing regulations around stablecoins, which serve as the foundation for DeFi activities.
“Let's create that framework first because that will give stability to the system. Stablecoins will be the backbone of blockchain payments,” he said.
From there, they can work on developing more extensive rules around DeFi, which are likely to eventually include KYC requirements for DeFi applications before regulators give the final nod of approval.
A clear regulatory framework would help platforms like Streetbeat build with more confidence, which Scavo says will help increase the value proposition and help to normalize blockchain technology so that it is something that everyone will feel comfortable using.
Once clear regulations are in place, Scavo sees a wealth of opportunities opening up for the crypto industry, as well as the introduction of central bank digital currencies (CBDC) on a global scale. And the creation of stablecoins won’t be limited to central banks or DeFi protocols, as large corporations like Microsoft and Apple will eventually develop their own.
“They're are just waiting for the framework to be there to be compliant,” Scavo said. “They will not risk a trillion dollar company just to create a stable, but when the regulations are in place, the big guys will create their own stablecoins.”
Facebook learned the hard way to not try and develop one before the regulators approve, a mistake that other companies are sure to try and avoid.
From there, the sky is the limit as to how cryptos and blockchain technology will be integrated into society. From use in insurance products to providing stable currency for inhabitants on a future moon base.
“It took me days to transfer money from Europe to United State and seconds to the same using Bitcoin. The money arrived before the email that said it did, so there is no way back. Blockchain is the future,” Scavo concluded.