Does the Bitcoin industry want/ need this help?
Nasdaq Inc. is taking on the challenge of helping Bitcoin achieve legitimacy amongst regulators and institutional investors. On the heels of the SEC’s second rejection of a Bitcoin ETF proposed by the Winklevoss twins (of crypto exchange Gemini), Nasdaq held a closed door meeting with representatives from several companies, including Gemini, to discuss a plan to legitimize cryptocurrencies.
Gemini has been very cooperative in trying to fix these challenges in the crypto space. In April this year, the exchange hired Nasdaq to conduct market surveillance for Bitcoin and Ether trading. They have also been active in proposing ways to create a Self-Regulatory Organization for the U.S. Virtual Currency Industry
However despite their cooperation, the SEC and institutions like Nasdaq share a continued concern over Bitcoins lack of adequate surveillance to prevent possible price manipulation and fraudulent activity, particularly due to the currencies global reach and use in unregulated offshore markets.
Do we want Bitcoin to become what the SEC & NASDAQ need it to be?
The crypto community is divided on this issue. On the one had we recognize the potential for a Bitcoin ETF to send cryptocurrency prices skyrocketing and potentially make us all richer. However, we also recognize that to revamp bitcoin according to the requests of the SEC and NASDAQ is to strip away the decentralized autonomous qualities that make it special in the first place.
Nobody wants fraud or price manipulation, however we must recognize that in any truly free economy there will always be an element of those traits. Bitcoin will likely never offer the same level of protection as stocks simply because stocks are regulated by centralized Governments, while Bitcoin is decentralized and can’t be regulated on a global scale.
A Bitcoin ETF would offer investors shares in trading funds, preventing them from being exposing to the risks of owning the actual crypto asset. However, the more institutionalized and regulated Bitcoin becomes, the less upside investors can expect to earn from the asset class. Institutional investors want in on crypto because they see others making 30%-100% returns in days or weeks. Yet the more tightly regulated the market becomes, the less potential exists to make those type of returns over such a short period of time.
As for the crypto purists and retail investors who have already been in the space, excess surveillance and fraud protection measures may only create more barriers to the current flexibility we have to trade coins between exchanges efficiently and anonymously.
Furthermore, the long-term consequences of Bitcoin becoming institutionalized is that the dozens of other valuable currencies that aren’t under the same level of regulatory control may be featured less prominently on exchanges (or in the worst case, possibly delisted).
2018 has brought forth a phase in evolution of cryptocurrencies e. What was once a niche technology, passionately used by cyber punks and libertarians is now being integrated into the fabric of mainstream society via regulators and financial institutions. This progression will allow more early adopters to reap the rewards of their foresight into the value of cryptocurrencies. Yet at the same time, the crypto space will begin to lose a lot of the decentralization and privacy that made it so unique in the first place.
It remains to be seen if or how we can find the right balance between institutional acceptance and maintaining the principles that make crypto special. What is clear is that for better or worse, the Bitcoin that will soon achieve ETF approval and eventually get listed on the NASDAQ exchange will be very different from what Satoshi envisioned almost 10 years ago.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.