This part 1 in a new series of videos where we'll explore what it will take for crypto to really take off, based on a recent survey of financial advisors.
UK Crypto Assets Taskforce: Final Report October 2018
Global Bitcoin Political Support & Public Opinion
Metcalfe’s Law On Wikipedia
Dictionary Definition For ‘Regulate
Andreas Antonopolous YouTube Channel
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In a recent survey of financial advisors, the number 1 answer to the question…
“What is preventing you from investing more in crypto?”
Was “regulatory concerns”.
To quote the great Andreas Antonopolous, when someone says “that’s illegal” you have to ask “where?”.
Regulation is a set of government rules that are intended to ‘regulate’, which means to control or direct.
As the world becomes increasingly complex, it gets ever more difficult for small groups of people like government regulators to develop the understanding they would need in order to govern effectively.
But more than that, crypto assets don’t exist in the physical realm and thus they simply do not fit into frameworks designed for physical assets that are restricted to geographic areas.
The fact that crypto assets exist beyond geographic limitations is (ironically) what makes them so bloody useful.
The other problem governments have is that by the time they take some kind of position on crypto, the dynamics may well have changed simply due to the rate of innovation.
This is what you would expect from a worldwide collaboration due to Metcalfe's law, a law which states that the effect of a network is in proportion to the number of connections between users, rather than simply the number of users.
So why does regulation remain a concern?
Because governments are taking their sweet time in publishing clear guidelines.
Many western governments took a “wait and see” approach only to retrospectively punish a number of companies for not complying.
The British government has gotten closer to understanding crypto than most by saying that the tax regulation depends on how the asset was behaving at the time.
While this is still as clear as mud, at least it accurately reflects the dynamic nature of crypto.
The answer to the question “What is Bitcoin?” depends on what you use it for. Value transfer, payment method, store of value etc.
Coming back full circle then.
Remember that this was a survey of financial advisors, so there is no wonder that regulation came out as the most popular concern.
For the sake of their career, financial advisors absolutely have to wait until there are financial products that have definitively passed regulatory approval before they can put their clients money into them.
Even then they’ll more likely be investing in derivatives rather than the bearer assets.
And that brings us to the very core of the issue, the fact that crypto assets themselves cannot be regulated because they are autonomous.
So what ends up being regulated are the financial institutions and individuals that create and handle crypto assets.
Ultimately it’s an impossible problem due to the mismatch between the amount of resources available to regulators and the speed at which crypto is changing and growing in complexity.
So what is an individual to do?
There are two general paths one can take.
Stay well away from crypto and don’t get involved until somehow the regulations become crystal clear.
Or take it one year at a time and do your best to comply with whatever regulations are in place.
I’m taking option B because I’m prepared to embrace a bit of unpredictability in order to be involved at the time of maximum opportunity.
So that’s all for part 1 in this series of videos exploring what it will take for crypto to really take off.
Checkout the resources I’ve put in the description and hit subscribe if you’d like to be ready for part 2 when we’ll explore the second barrier to crypto taking off, price volatility.
Until then, it’s me Chris Coney saying, bye for now.