We’ve had the ability to trade cryptocurrency without much involvement from the government over the past decade.
This has allowed our ecosystem to flourish, develop, and expand faster than ever. Fantastic new companies have sprung up, entire new chains have been developed, and there are more cryptocurrency projects launching daily.
Yet the system is not without its challenges.
We’ve seen exit scams, rug pulls and blatant lies resulting in investors losing millions of dollars.
This final point is what concerns governments.
Whether you like it or not, Coinbase’s massive IPO, and Bitcoin’s +$60,000 price point has shone a very bright light on the cryptocurrency industry. The first group of companies under the spotlight? The on and off-ramps of cryptocurrency, also known as crypto-exchanges.
The world of cryptocurrency trading is about to change forever.
Coinbase Goes Public, Governments Get Focused
Coinbase’s Initial Public Offering surpassed the hype. Hitting a valuation of +$99-billion, the company entered the public markets with a huge splash.
Not only has this illustrated to other exchanges that there is a tidal wave of opportunity to raise capital in this manner, but it has also shown governments that there is a very strong demand from investors to invest in the crypto industry.
This means governments will need to pay even closer attention to the market, and primarily to the on-ramps and off-ramps that allow people to get into the space.
We must remember that one of the government's jobs is to protect its people from excessive financial harm. This often means restricting access to investment opportunities that only “sophisticated investors” can understand.
As you’re aware, one of these restrictions comes in the form of being an Accredited Investor, a title which, once obtained, can open up a world of investment opportunities in early stage startups.
While the government has not yet regulated the cryptocurrency market in the same way, there are more regulations that are coming, and more requirements that exchanges will have to follow in order to allow investors to purchase cryptocurrency.
This focus means increasing regulatory impact will soon follow.
Regulatory Impacts Are Already Shifting Expectations
As US users of Binance have realized, regulator effects have already affected their ability to trade, as the US government has imposed heavier restrictions on exchanges across the board.
In November 2020, Binance made very strong movements to encourage US traders to withdraw their funds before the government impact completely affected their exchange. As such US users were restricted from trading on the Binance platform.
The reason behind this shift? Government requirements and regulation.
Binance would have needed to implement new regulatory practice and procedure that the US government was imposing. This is difficult, costly, and time consuming.
Similar is now happening in Canada, where earlier this year CoinSquare was required to hand over thousands of customer records for tax purposes, and Binance, once again, has decided to withdraw services from Ontarian’s due to new regulatory requirements that are beginning to be imposed.
What Traders Need To Consider
Regardless of your trading frequency, all investors in the cryptocurrency space will want to start considering how regulatory impact will affect their ability to trade.
Every country around the world will continue to pay more attention to the cryptocurrency market, both from an opportunity perspective, and from a regulatory perspective. This is doubly true now that governments have printed vast amounts of currency due to pandemic lockdowns.
Moving forward governments will not only want to monitor the shift in assets from traditional markets to cryptocurrency markets, but will also want to ensure they keep their tax revenue afloat, and protect new investors that are looking to step into the cryptocurrency space from ultimate financial ruin.
If you’re trading cryptocurrency now, investing in it for the long run, or are considering investing in the space with a portion of your portfolio, you’ll want to make sure you’re on an exchange that understands the regulatory hurdles that the government is bringing to the forefront.
Additionally you’ll want to find an exchange that has already started or gone through the regulatory process in your country. This will protect your ability to access cryptocurrency and make investments in the future.
As a quick example, Coinberry has already progressed through most aspects of the regulatory process in Canada. It has been a long process (+2-years), and has required focused effort from all parties involved. The regulatory process has required increased security standards, 3rd party audits, and insurance solidification at levels that were not previously necessary, all benefits to any investor.
While Coinberry’s journey through the regulatory process is close to completion, others are just getting started.
Regardless of the exchange you prefer, you’ll want to consider the following:
- Is your exchange already regulated in your country?
- Is your exchange undergoing financial regulation (SEC, OSC, etc.)? If so, are they just getting started (expect a long process, and possible trading restrictions until complete), or have they already progressed down the regulatory path substantially?
- Does your exchange have the necessary insurance measures (as required by the government) to comply with new standards and requirements?
- If your exchange does not have some or all of the above, do you have an exit plan to move your crypto to an exchange in your country that does satisfy the latest government requirements?
The on-ramps and off-ramps that cryptocurrency exchanges provide have already started shifting. Coinbase’s public offering shed more light on the fastest growing financial industry in the world, and has encouraged governments to speed up their regulatory process.
Government’s are paying attention, and we can expect to see a wave of regulatory implications, and tightening restrictions in the next 4 to 8 months.
If you’re looking to maintain your access to the cryptocurrency market, and do not want to have any downtime in your ability to trade, finding an exchange that has regulation in mind, and that has taken the necessary steps to protect its users, will be critical to ensuring you’ve got a great trading experience moving forward.
Author: Andrei Poliakov is the CEO and Co-Founder of Coinberry, one of Canada’s premier digital currency platforms. He led Coinberry to become the first in Canada to partner with a Government Municipality and become one of the earliest platforms in the country to undergo Canadian crypto-exchange regulation. He helps others understand cryptocurrency trends, gain technical insights, and overcome common misconceptions about the cryptocurrency industry. Andrei believes in pushing the boundaries of the status quo and is passionate about inspiring blockchain adoption through education.
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