ELIAN D. ALVAREZ

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Should Regulators be Concerned About This Profitable Investment?

Nov
23

Although investors from around the world have shown increasing interest in the digital currency, many regulators negatively criticize Blockchain and Initial Coin Offerings (ICOs). However, there has been an exception recently as Yao Loong Ng, the executive director of the Financial Market Strategy department, is encouraging the regulatory authorities around the globe to learn about cryptocurrency and ICOs. He even pointed out the fact that learning about the developments in the world of digital currency can be useful for regulators.

In a panel discussion of the South East Asian Nation Capital Markets Conference that was held in Malaysia, Ng said that it takes a lot less time to market for the ICOs as compared to IPOs (Initial Public Offerings).

IPOs can take as much as 9 months to market. This is why he believes that if the entire process of writing a white paper for ICOs and its subsequent listing is taking just a few days, then regulators certainly have something to learn from it.

 

Current Developments in Cryptocurrency

But the question is, why is there a need to regulate it? Cryptocurrencies have gained a lot of traction in the last few years and so many investors have been investing in the virtual currency. In fact, in July 2017, Alex Tapscott, Blockchain Revolution’s author, made an announcement of closing an over-subscribed financing of 20 million dollars for his digital investment funds. The hedge fund is called NextBlock Global. His opinion is that this fund has everything, including domain expertise, and market access to have a bright future.

Last year in September, Olaf Carlson also created a hedge fund of digital currencies, which had more than $200 million in Assets Under Management. Among many venture capital firms that are backing this fund, Union Square Venture, Sequoia Capital, Andreessen Horowitz are a few leading names.

Currently, the majority of the investors in the world of digital currency are either individuals with high wealth or retail investors. Institutional investors have so far shown very limited interest in cryptocurrencies. But this is not going to stay the same. In fact, the change has already started taking place. The new flow of investment by the institutional investors will give a boost to bitcoins and other altcoins by pushing its value rapidly in the upward direction due to their small market capitalization.

In times like this, it has become increasingly important to step forward. Instead of negatively criticizing the new form of currency, it’s time to embrace it and start the efforts of regulating it. Although, there has been a constant backlash from the regulators community at large, there are a few countries where authorities are working on creating regulations.

 

Regulating the Digital Currency

In Malaysia, the Security Commission has made an announcement that it is currently in the process of preparing guidelines and regulations on how these currencies should function, which includes secondary market trading of established digital assets and currencies.

Tan Sri Ranjit Singh, the chairman of the commission said that they are working closely with the central bank of Malaysia to develop a framework on cryptocurrencies. He further added that it will take a few months for the framework to complete. He also mentioned that they are observing it very carefully and since the Security Commission control and regulate the secondary market, they will design the rules and regulations in such a way that there is a right condition in place for trading values in order to secure market integrity. This is also being done for providing the projection to investors.

 

Regulatory Efforts

A consultant at the Institute of Defence Studies and Analyses, Munish Sharma, talked about the dilemma faced by most regulators, especially when it comes to the existence of this new technology in the highly regulated space. He said that digital currency has gained a lot of investors’ attention in the past 5 years, but at the same time, there have been growing concerns among the financial institutions’ regulators around the world.

Instead of just letting the digital currency grow without any interference or regulation, governments of various countries are brainstorming with the regulators on how to regulate these virtual currencies.