As the FCA delayed the restricting of licenses for 12 firms and further complexities were underlined within crypto regulation. Todd Crosland, CEO of CoinZoom, told PaymentExpert why regulatory trust remains a vital endeavour for digital currency.
Reflecting present circumstances, Crosland emphasised that ‘the demise of cash, combined with the onset of new digital banking tools, has undoubtedly accelerated the rate of crypto usage’.
Highlighting the importance of firms like PayPal, Revolut and Facebook expanding their crypto offerings, and in the case of El-Salvador, an entire nation has begun accepting Bitcoin as legal tender – with the consequences being that in 2021 alone, crypto usage rocketed by 881%, with cryptocurrencies becoming an increasingly viable payment option for consumers.
He added: “Despite this explosion in retail trading activity, the price of tokens remains extremely volatile. Bitcoin, for example, reached an all-time high of $68,000 in November 2021, but has since fallen significantly. Macroeconomic factors such as inflation and geopolitical tensions mean that it has dropped to almost half that value at times in 2022.
“The notoriously volatile nature of cryptocurrencies has led the crypto market to become the subject of intense scrutiny from authorities. Official bodies such as the Federal Reserve, Financial Conduct Authority (FCA) and Bank of England have repeatedly warned consumers that they should be prepared to lose money if they invest in cryptocurrencies. While digital assets have undoubtedly grown in mainstream popularity, scepticism from policymakers continues to hamper their widespread adoption.”
Providing insight into the importance of regulatory framework when it comes to building trust in digital currency, he continued: “Some in the crypto space virulently oppose regulation, arguing that it would hinder innovation and contradict the very decentralised foundations upon which cryptocurrencies were built. In this scenario, financial task forces would take a hands-off approach, leaving the industry to self-regulate.
“However, rather than a barrier to innovation, the implementation of a clear and well-developed set of rules will be vital towards integrating cryptocurrencies into the broader financial system. For the industry to continue to grow and become mainstream, customers must have trust in the infrastructure and framework underpinning it – and it starts with regulation.
“This trust cannot be founded in an unregulated environment that permits bad actors to roam freely. The UK’s Financial Conduct Authority recently reported a double in the number of alleged crypto-related scams in 2021 compared to the previous year, while the cost of cryptocurrency fraud over the past decade now stands at $19.2 billion globally. This, if anything, should serve as an impetus for introducing the regulation needed to tackle this crisis of trust.
“Clear accounting rules are critical to achieving this, not only helping companies shape their crypto strategies, but also providing them with the tools they need to make crypto a safe and orderly marketplace for investors.”