Crypto regulation: what will it mean to you?
4th April 2022 |
If you’re reading this, then you know what cryptocurrencies are. I trust that you’ve read enough of our work to know the good and bad in this market.
Hopefully you’ve gone through all our supporting material on crypto.
That material includes our reports:
These are all designed to help educate you and prepare you for a lifetime of investing in the crypto markets.
That’s because in our view once you start investing in crypto markets, you’ll never stop.
As the crypto economy continues to expand, so will the opportunities.
For example, when I first started out in crypto it was pretty much just bitcoin then Litecoin and… well that was about it. Had the crypto economy continued on with just those for the next decade, we might be having a very different conversation.
Or no conversation about crypto at all.
But thankfully that wasn’t the end of it.
By 2013 we’d seen an entire alt-coin boom. And the market continued to expand from there. More blockchains, more networks, more crypto projects (good, bad and ugly!) and tokens everywhere.
Then decentralised exchanges came along. Then non-fungible tokens (NFTs) came along in 2017. Then DeFi and yield farming came along. Then play-to-earn gaming came along. Then NFTs came back…
This is just a tiny fragment of what’s come about in the last decade… most of it within the last five years really.
And I expect that, over the next five years, there will be more avenues for investment. I believe that the rise of synthetic assets is going to become a major aspect of the next evolution of crypto.
Think of any asset on any market in the world, or just any asset in the world with a digital synthetic, tradeable token. These can be traded anywhere, anytime, by anyone. A truly free, borderless accessible market for any asset in the world.
I expect we’ll continue to see the rise of the DAO (decentralised autonomous organisation). This is a whole new way of thinking about corporate structures and governance within organisations. Imagine a profitable organisation with no traditional hierarchical structure. An organisation where every single owner of the company (possibly thousands) makes all the decisions.
These are just some of the ways near term I can see the development of crypto heading.
The key point is that innovation and development are a crucial and constant part of the crypto world. It pays to know what’s going on, what’s happening and what might be coming next so that you can become a better investor and seize the opportunities when they land.
However… certain regulators want to make it harder for you to access that information. They want to close off access and restrict it because they think it’s too risky for you.
Now you might think I’d be 100% against this, and for a large part of it, yes, I am. However, a little bit of oversight isn’t such a bad thing if it comes from the right place, from the right people and with the right intentions.
I fear that might not be the case, so you better prepare for what might be coming as soon as this year.
You’re not smart enough
On balance, the regulatory crowd doesn’t think you’re smart enough to make your own assessments on risk. They think the only responsible adult in the room is them. Therefore, in assessing what you should or shouldn’t be exposed to is a decision for them to make about your life.
How do you feel about that?
Now I will admit, there needs to be some measures in place to ensure that people aren’t ripped off, that people aren’t scammed: it’s important that people do go into an investment understanding a base level of what it is they’re doing.
But what I wouldn’t expect is that you know everything there is to know.
The regulator here in the UK, the Financial Conduct Authority (FCA), does a good job within the traditional financial system of providing some checks and balances on who can give out financial advice, what they can say and how they can present their advice to people.
This ensures that appropriate qualifications are in place, that advisers don’t mislead or deceive people and that they’re honest, trustworthy, ethical and acting in the best interests of the end user/consumer first.
That’s why here at Southbank Investment Research, anyone that provides specific advice, must have the right kinds of qualifications, must maintain ongoing professional development. He/she must adhere to the principles and rules in place to ensure that investors get a fair deal.
I have no issues with any of that at all.
And I actually would welcome that kind of approach to the crypto world.
I believe there should be some kind of minimum threshold or experience, or qualification if you’re going to dish out what is effectively financial advice, even though it might be around crypto.
It won’t be the same kinds of requirements that are needed in the traditional system because it is inherently not the traditional system. But there does need to be some kind of key principles put in place so that people don’t mislead and deceive the consumer.
There should be some checks and balances in place so that people aren’t scammed from some random punter on TikTok or YouTube that is putting their own benefit ahead of the consumer.
The good news is these kinds of regulatory oversights look like they’re on the way. This is one of the key aspects I believe the FCA wants to bring in line with the traditional system.
As the government notes:
Around 2.3 million people in the UK are now thought to own a cryptoasset with their popularity rising – but research suggests that understanding of what crypto actually is declining, suggesting that some users may not fully understand what they are buying. This poses a risk that these products could be mis-sold.
And in a news release from 21 March, the Australian regulator, the Australian Securities and Investments Commission (ASIC), published information for “social media influencers and licensees”:
ASIC Commissioner Cathie Armour said, ‘The way investors access information is changing. It is crucial that influencers who discuss financial products and services online comply with the financial services laws. If they don’t, they risk substantial penalties and put investors at risk.
… 33% of 18-21 year olds follow at least one financial influencer on social media. The survey found a further 64% of young people reported changing at least one of their financial behaviours as a result of following a financial influencer.
This isn’t directly aimed at crypto, but there’s no doubt that’s the focus here seeing the rise of things on social media like “FinTok” (financial TikTok).
Now all of this, I don’t really have a problem with. The issue that will be tricky is where the line is drawn between advice and information. It is important that correct and ethical, moral, professional information is available. However, you can’t stamp on the industry with over-zealous restrictions – for instance, by requiring that everyone that even talks about crypto needs a financial services licence.
What’s also concerning is the suggestion that advertising services that do provide crypto advice will only be allowed for those who self-certify as a “sophisticated” or “high net worth” investor.
This is a situation we do fear because it would shut off access to millions of people simply because the regulator deems crypto too risky. What’s interesting about that suggestion is that the defining threshold for someone who’s able to assess that risk for themselves would be how much traditional fiat money you have.
I’ve met plenty of people who wouldn’t qualify as “high net worth” that are far more capable of assessing risk than some who do. Being rich is not a bar that should determine your ability to assess what is or isn’t good for you.
This is why I welcome tighter rules around who can provide advice: if that advice is better, more professional and more reliable, then you don’t have to restrict who can access the information.
We don’t know for sure how this year will play out around the coming regulation. I’d like to think the regulators won’t stand in the way of innovation but will ensure there are the right consumer protections.
If they rule with an iron fist, then it’s going to get harder to access the right information from reliable sources.
So… you might want consider sticking with us when the time comes to renew your subscription. If the regulator goes full-on, it may be the only way to ensure that you keep getting information from a source (us) that already meets all those criteria for as long as you’re a member.
We will continue to make sure we adhere to the highest standards both with our traditional finance work, and here in the crypto world too. We will ensure that we continue to set the standard.
Crypto to Know
Below is our “Crypto to Know” list where you’ll find several cryptos that we think you should be taking the time to learn and understand.
They each form an important part of the burgeoning crypto ecosystem.
Several of these cryptos are doing very different things to others.
What’s key is to learn that every crypto has its own use cases, its own guiding principles, and its own particular potential.
Each crypto is to be judged and assessed on its own merits.
Our aim here is to help you understand these cryptos and the wider crypto world.
These aren’t specific recommendations but a guide to help you learn and build your confidence in operating in this space.
We will add more names to this list over time. However, if you’re new to the world of crypto, these are the names where we think you should start your education and learning.
We’ve also added links to each one.
The links are to what we believe, in each case, is the best resource for learning about that crypto.
“Crypto to Know” watchlist
- Bitcoin –it/wiki/Main_Page
- Ethereum – ethereum.org/en/what-is-ethereum
- IOTA – docs.iota.org
- Tezos – https://tezos.com/learn/getting-started/
- Filecoin – docs.filecoin.io
- Cosmos – v1.cosmos.network/intro
- Binance – binance.com/en/about & research.binance.com/en/projects/bnb
- FTX – ftx.com & help.ftx.com/hc/en-us
- Solana – https://docs.solana.com/introduction
- Secret Network – https://scrt.network/about/about-secret-network
Sam Volkering
Editor, Sam Volkering’s Crypto Network
