Regulation Is Necessary For Institutionalization Of Crypto Assets But Could Be Slowing The Space



The sixth European Blockchain Convention kicked off on Monday with a discussion on what needs to be done to institutionalize digital assets. Two factors that stood out were regulation and security among the panelists involved. According to Patrick Heusser, Head of Trading at Crypto Finance (Brokerage) AG, it will be hard for money managers to put money in crypto assets without clear regulation. However, given that the industry is innovating quickly, he believes regulators can’t keep up with speed. He hopes regulators don’t give up and shut the door; however, they should try to keep up and make crypto accessible to everyone.

“It will be hard for money managers to put money in crypto assets without clear regulation” – Patrick Heusser, Head of Trading at Crypto Finance (Brokerage) AG

Visual of Karl Gridl, Patrick Heusser, Coty de Monteverde, Jean-Baptiste Graftieaux and Roberto Machado at the 6th EBC

The five-person panel was moderated by Coty de Monteverde, Head of Crypto and Blockchain at Banco Santander, who kicked off the discussion seeking to understand the current opportunities and challenges within the crypto space.

Opportunities Within Crypto

The cryptocurrency space has sparked a cultural shift in finance where individuals today, especially the young ones involved, have control over their investment decisions. According to Heusser, this is quite different from the past where banks and asset management firms had to make decisions for people based on their risk profile and compliance issues involved. The shift means people now have more freedom and responsibility where they put their money, and due diligence is vital.

Heusser, a former interest rates trader at UBS, also sees the industry growing in use cases from finance to gaming. It’s a sentiment shared by Karl Gridl, an associate partner at Bain & Company who helps consult with various FinTech startups in Europe. In a short period, crypto has gone from solely focusing on finance to pharma, gaming, media, and its influence on a few other industries is on the rise.

“Blockchain helps address issues such as monopolistic structures that discourage competitive behavior” – Karl Gridl, Associate Partner at Bain & Company

According to Gridl, the technology behind cryptocurrencies is excellent since it helps address issues with centralized systems such as monopolistic structures that discourage competitive behavior. The technology allows for transparency, interoperability, and financial inclusion, thus giving control back to the user.

 

Panel Discussion visual elaborated by EBC team

Challenges With Crypto

Establishing an adequate regulatory framework is necessary to institutionalize the crypto market. The European Commission’s Regulation of Markets in Crypto-assets (MiCA) rules will commence sometime in 2024. These rules seek to establish a regulatory framework for the crypto market and issue a single licensing regime for all EU member states, thereby simplifying access to the market for institutional and retail clients.

“The regulation has not been clear, but the coming MiCA should change this situation” – Jean Baptiste Graftieaux, CEO Europe at Bitstamp

According to Jean Baptiste Graftieaux, CEO Europe at Bitstamp there is a regulatory shift where businesses are required to acquire some licenses to operate in specific nations; however, things haven’t been entirely clear, and the situation has been complex. But the coming of MiCA should change this situation.

What Needs To Be Done?

Other EU states can borrow a leaf from Switzerland’s playbook. The nation has been at the forefront when it comes to crypto adoption. Today there are over 1,000 crypto startups in the nation, thanks to generally conducive regulation. According to Karl, being pragmatic has been vital. Instead of waiting to figure out the entire space before coming up with adequate rules, they have opted to deal with things as they come. The problem with waiting is the market keeps innovating, which means regulators have to play catch up. Therefore, speed is of the essence.

“Another major issue that has hampered the institutional adoption of crypto has been security” – Roberto Machado, General Manager EMEA at CYBAVO

Another major issue that has hampered the institutional adoption of crypto has been security. According to Roberto Machado, General Manager at CYBAVO, institutions are scared of losing their reputations given the apparent cyber threat presented by crypto. There are a few issues companies need to contemplate if they are to provide digital assets successfully.

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Published December 15,  2021, Barcelona

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