Why aren’t cryptocurrencies more popular around the world than they currently are? Is it the lack of regulation, resistance from those who it would disrupt, or something perhaps more simple such as the technical aspect of the sector?
It’s certainly not just one thing, but it’s possible that if hurdles such as those are overcome, digital assets could be the disruptive technology those of us who are in the industry know it can be.
We’ll discuss the hurdles that are still in the way, and why they’re in the way. Let’s start with regulation.
Regulation is likely the most important and most difficult hurdle to overcome for cryptocurrency adoption. The lack of clarity and unified laws when it comes to crypto assets both across and within countries can be difficult to navigate. The US is the best example of this, as you have both welcoming and resistant states and politicians. The Securities and Exchange Commission (SEC) thinks almost all digital assets are securities, while the Commodities Futures Trading Commision (CFTC) thinks they’re almost all commodities. They can’t both be right.
The SEC has begun to overstep their boundaries and have opened up lawsuits against both Coinbase and Binance, two of the largest crypto exchanges globally. The SEC claims a variety of digital assets to be securities, which triggered sell-offs by many North American holders, and created a lot of negative spin. Part of the overall issue of global adoption is that the US is one of the biggest markets and it has poor regulatory clarity for investors/adopters.
In quite a stark contrast to the US, the EU is getting close to passing their Markets in Crypto Assets (MiCA) framework in parliament. This will provide investors and developers with clear guidelines, rules for taxation, and more when it comes to their digital assets, especially the decentralized finance (DeFi) aspect.
Similarly, London is looking to become an international crypto hub. They’re pushing forward their Financial Services and Market Bill (FSMB), which provides similar clarity to MiCA.
Of course, there are also countries that have banned crypto altogether, and if you’re within one of those countries, regulation likely won’t help you.
However, if and when the MiCA and FSMB bills are passed, they will provide clear regulation for all investors, retail or institutional, in both regions. This could certainly trigger increased adoption.
Traditional Institutions’ Resistance
Somewhat tied into regulation is the resistance that many traditional financial institutions have towards cryptocurrencies. Whether your local bank, or the SEC, most traditional pillars of finance aren’t overly excited about digital assets. It’s not that hard to figure out why.
Blockchain technology has the power to completely disrupt and perhaps even replace the traditional financial system. With smart contracts, publicly accessible ledgers, faster settlement times, and lower fees than almost all traditional finance (TradFi) options, blockchain networks can replace the need for banks. They can also provide a way to bank for those in countries without easy access to banking. The
The amount of money these TradFi businesses would lose if crypto were to be mass adopted is likely unfathomable. That fact should probably give you an idea of why they don’t want it to take off, but also why you should. The amount of money you’d save as a consumer with many bureaucratic steps removed from processes such as sending money to your relatives in another country or converting assets would be extremely worthwhile.
If TradFi businesses can find ways to make money even if crypto adoption takes off, that will be their sweet spot. PayPal, as a somewhat more modern traditional finance player, is already taking steps like this, by creating their PYUSD stablecoin, and integrating with popular crypto apps and platforms such as MetaMask, Coinbase, and Ledger. But, until TradFi businesses are willing to make these changes, they’ll likely push back against any positive regulatory changes.
Crypto Tech is Still Confusing
This isn’t necessarily the most obvious hurdle, especially if you’re younger and have grown up with technology. But for many people the concepts of cryptocurrencies and blockchain technology are quite complicated. Even those that are technically inclined can still struggle with the ways in which crypto wallets work, how transactions are done, how to provide liquidity, and any number of other technical steps you need to take when interacting with digital assets.
By simplifying the way in which people interact with blockchain, especially in a way that makes it hard to tell that you even are interacting with blockchain, it will be a big boost for crypto adoption.
Many companies are already working on things like this, with PayPal being an example of a non-crypto company, and MetaMask being a crypto one. PayPal is trying to make simple integrations with Web3 platforms and PayPal, while MetaMask is working with PayPal to provide easy options for users too. In addition, MetaMask is always improving the user interface and features of their extremely popular wallet.
Closing Thoughts: Crypto is Coming
Crypto adoption is coming, but how fast is very hard to say. There is a lot of good infrastructure in place for blockchain if it does take off, but there are also a lot of hurdles that it needs to clear to get there. Having technical know-how is certainly one of them for what is a fairly advanced technology. Regulation is likely the most important hurdle to clear, but is also the one that is likely the hardest.
TradFi companies being less resistant to crypto would likely help with regulation as well, but they have good reason to be concerned.