Cryptocurrencies have been on a rollercoaster ride of popularity over the past few years, with high-profile gains and losses notched on a regular basis. However, they are now running into several challenges in the United States, leading many to bury their hopes in this emerging market. But, despite the headwinds, the crypto market still deserves a chance to succeed. Here’s why.
Fierce Regulatory Environment
The regulation of cryptocurrencies in the United States is a hotly debated topic, with various agencies and states holding different opinions. It makes the whole issue complicated. While the Federal Reserve sees cryptocurrencies as a risky investment, the Commodity Futures Trading Commission has granted approval for the trading of Bitcoin futures and other cryptocurrencies.
And even then, while Bitcoin is not illegal, its use as a medium of exchange within the financial system is banned in some states, such as New York. In fact, some crypto-based companies have had to relocate to foreign countries such as Switzerland or Estonia to conduct their business in a more favorable regulatory environment.
But crypto enthusiasts should not despair. With the momentum of digital currencies growing globally, it is only a matter of time before the U.S. recognizes them and creates a level regulatory playing field.
The Rise of Stablecoins
One of the biggest concerns regarding cryptocurrencies has been their volatility in price, even in the short term. For an industry struggling for acceptance in the financial world, it is a significant point of concern. Cryptocurrency prices are known to sometimes swing by hundreds of dollars within hours, which isn’t good for mainstream adoption considering that most investors and traders want a certain level of predictability and stability from their investments.
To counter this, a new type of cryptocurrencies known as stablecoins has emerged. Tether is probably the best-known stablecoin. The coin is pegged to the United States dollar, so its price remains relatively stable. Several other cryptocurrencies with similar principles have arisen, such as DAI, TrueUSD, and USDC.
Stablecoins provide some predictability and stability to the market while retaining the advantages of cryptocurrencies. They serve as a medium of exchange and store of value, which makes them an attractive option for everyday use by businesses and individuals.
Reputational Obstacles
Despite the potential of cryptocurrencies, the industry is still fighting a PR battle. Crypto-related scams still make the news, and the general public remains wary of the technology. Crypto’s reputation suffers as a result of the lack of accountability and transparency.
Can it cope? Absolutely. Some of the leading cryptocurrencies are working on protocols that will increase transparency, and regulations should increase accountability in the industry.
In the end, cryptocurrencies will thrive because of their underlying technologies; blockchain offers every enterprise the potential to create real-time immutable ledgers for storing digital assets. Smart contract platforms allow companies to create and enforce legally binding contracts with no middlemen or intermediaries. And digital identities offer greater security than traditional identification protocols currently in use.
What Makes the Crypto Industry Unique?
Despite the bleak outlook that many have for the industry in the U.S., the entrepreneurial spirit has found a home in cryptocurrencies. Developers and entrepreneurs working in the crypto space embrace challenges, master them, and move on to the next ones. In the face of regulatory uncertainty, volatile markets, and reputational issues, they remain undeterred in their quest for mass adoption.
Cryptocurrencies and their underlying blockchain technology are blazing new trails in finance, accounting, supply chain logistics, and more areas that have yet to be explored. It is a unique industry that is attracting the attention of world governments, financial institutions, and big tech companies. With hundreds of new startups and new use cases emerging every day, it’s not difficult to imagine cryptocurrencies becoming more mainstream in the coming years.
Embrace The Future
The U.S. has been slow to embrace cryptocurrencies, but that should not be a deterrent. The industry offers a wealth of potential, and the flurry of activity around cryptocurrencies shows that there is real interest in exploring what they can do. Competent regulations, stablecoin models, and increased transparency will help build greater trust and acceptance of cryptocurrencies.
While it is impossible to predict the future of cryptocurrencies, it is fair to say that the industry is here to stay. There are still many challenges, but entrepreneurship, innovation, and persistence have always been hallmarks of those working in the crypto space. Past performance is not an indicator of future results, but it is not a stretch to say crypto has got the resources and know-how to overcome today’s challenges.
Cryptocurrency has faced a tumultuous few years in the United States, with regulatory uncertainty and market volatility contributing to a growing level of skepticism about its future. However, while many industry figures have expressed doubts about the potential for cryptocurrencies in the US market, investor Chamath Palihapitiya recently acknowledged that they may still have a future in other parts of the world. While Palihapitiya cited lack of regulatory clarity and government focus on traditional finance as reasons why crypto is “dead in America,” he stopped short of saying the market is truly dead, and emphasized the importance of understanding how other factors are affecting the market.
One primary reason for cryptocurrency instability is the lack of regulatory oversight, which has made it difficult for governments and financial institutions to control and regulate the cryptocurrency industry. This has raised concerns about illegal activities such as money laundering and tax evasion, as well as speculative trading. The uncertainty is exacerbated by a lack of liquidity and unreliable valuation metrics for cryptocurrencies.
The Securities and Exchange Commission (SEC) has been engaged in an ongoing turf war to regulate the US crypto market, cracking down on industry insiders such as Kraken, Coinbase (COIN), Bittrex, and others, in order to protect investors from potential fraud and manipulation. However, their actions have also created uncertainty in the market, as it is difficult for companies to develop new projects without clear guidelines for what is and is not allowed. This lack of clarity has hurt the industry by delaying product launches and harming the reputations of major players.
Despite these challenges, the cryptocurrency industry is fighting back. Coinbase, for example, is suing the SEC for attempting to regulate cryptocurrencies without proper authority and acting without clear guidance on the regulatory status of cryptocurrencies. As a result, the company claims that the SEC’s actions have harmed its business by delaying the launch of its lending product and damaging its reputation.
Despite the challenges facing the crypto industry in the US, many investors believe that it still has a promising future. Indeed, cryptocurrencies have shown resilience in the face of inflation, bank failures, and increasing national debt. While there is still uncertainty around how the government will regulate the industry, it is important to remember that the US has been at the forefront of blockchain innovation and has been a driving force behind the development of new financial solutions and ideas through cryptocurrencies that can help millions of people gain access to traditional financial tools.
As blockchain entrepreneur and investor Brandon Zemp notes, support for the industry is growing in Congress and many companies are helping educate lawmakers. The courts, for their part, are likely to favor innovation and fair rulemaking as they work to sort out the legal framework for cryptocurrencies. Ultimately, while the fear of China out-innovating the US may loom large, crypto remains alive and well – and poised to continue paving the way for the future of finance.
