About two years ago I started a process most freedom-seeking entrepreneurs would dodge at all costs: I sought out regulatory oversight for my business, voluntarily. You might think welcoming in avoidable administration, regulatory fees and extra hours of tedious reporting isn’t the most efficient way to run a business, and you’d be right. But in our case, continuing to operate in the unregulated industry of cryptocurrency without it, seemed like a greater risk.
Despite Bitcoin reaching nearly $20,000 recently—a record high—the industry’s reputation has been stained by money laundering and Ponzi schemes. Those days may soon be numbered, however. The Canadian Securities Administrators’ CSA Sandbox has been working closely with industry insiders, who are eager to curb crypto fraud. This could have wide-reaching implications on Canada’s crypto industry, which I believe is heading towards a tipping point for mainstream adoption. Here’s why:
The Crisis Has Investors Questioning the Value of the Dollar
While a vaccine may be in sight, the country’s response to the global pandemic has investors betting against the future value of the dollar. Canada’s central banks were quick to issue bonds and print more money to fund CERB payments in response to rampant unemployment. Likewise in the U.S., the Federal Reserve has been printing money at an unprecedented rate. In June alone, the U.S. printed more money in one month, than it had in the first two centuries after its founding.
While this increase in cash supply may offer temporary relief to businesses and consumers hit hard by the crisis, savvy investors are keeping an eye on the long-term effects of inflation.
Concerns over the dilution of the dollar and uncertainty around how the global crisis will impact it has investors and corporations alike converting cash into harder assets like gold and crypto.
Bitcoin is Becoming a Haven for Corporate Reserves
The idea of corporations sheltering their earnings in alternative currencies like Bitcoin is quickly becoming a reality. This year Bitcoin holdings at public companies topped $6.8 billion, with notable investments by corporations like Square and Microstrategy, and funds like Grayscale.
Online payments giant, PayPal also got into the crypto game in October, when it announced it would enable cryptocurrency as a funding source for its 26 million merchants.
Noting that cash payments are on the decline due to COVID, PayPal CEO Dan Shulman recently told the New York Times that the time has come for crypto payments to go mainstream. At the recent Web Summit, Shulman also stated compliance was key, encouraging cryptocurrency industry leaders to work hand in hand with regulators, stating there was no other way to play the game.
Central Banks Are Going Digital
While they may not be investing in Bitcoin anytime soon, central banks are taking a serious look at digital currency with several major banks having published plans to develop their own.
Digital currencies produced by central banks would be pegged to the US dollar and as such won’t curb concerns around inflation, however, they could serve as a primer for cryptocurrency adoption.
So despite the administration, extra fees and reporting, I expect we’ll see more crypto businesses seeking out regulatory approval in the coming months. Those who wait for a forced hand may just miss the opportunity to build consumer trust at a critical moment.
About the author: Mitchell Demeter (@MitchellDemeter) is a serial entrepreneur and pioneering figure in the cryptocurrency industry. Having gained worldwide attention for launching the world’s first Bitcoin ATM, Mitchell now serves as President of Netcoins, a BIGG Digital Asset Inc company (CSE: BIGG / OTCQB: BBKCF). Netcoins is a trading platform that makes it easy for anyone to buy, sell and understand cryptocurrency. He believes in building businesses that align with his personal values of freedom, trust and being willing to fail.