Regulations enter critical stage as gov’t shows interest

Regulations enter critical stage as gov't shows interest

Last week, the crypto community and Wall Street gathered in Nassau, Bahamas to discuss the future of digital assets during SALT’s Crypto Bahamas Conference. The SkyBridge Alternatives Conference (SALT) was also co-hosted by Sam Bankman-Fried’s cryptocurrency exchange FTX this year.

Anthony Scaramucci, founder of hedge fund SkyBridge Capital, kicked off Crypto Bahamas at a press conference, explaining that the goal behind the event is to merge the traditional financial world with the crypto community:

“Crypto Bahamas combines the crypto-native FTX audience with that of SkyBridge Asset Management. We are bringing these two worlds together to create a fairer financial system.”

Traditional finance focuses on cryptocurrencies as regulations take shape

The combination of traditional financial institutions and crypto natives is indeed one of the most striking and eye-catching aspects of Crypto Bahamas (many men and women wear suits, while some sport shorts and flip-flops). For example, Kevin O’Leary — better known as the Canadian entrepreneur “Mr. Wonderful” for his role on Shark Tank — told Cointelegraph that, it turns out, in Crypto Bahamas The people are the most important aspects:

“We have governments here from all over the world, and institutional investors who don’t actually own any cryptocurrency but are watching the political momentum. They’re starting to realize that big changes are coming.”

According to O’Leary, recent crypto regulatory frameworks by U.S. Senators Kirsten Gillibrand and Senator Cynthia Lummis, as well as the Stablecoin Transparency Act introduced by Rep. Trey Hollingsworth and Sen. Bill Hagerty on March 31, 2022, are now attracting Institutional interest in crypto.


“They concluded that this is an asset class that is here to stay,” commented O’Leary. While that may be the case, he noted that many traditional financial institutions still do not own any cryptocurrencies and will not own any digital assets until the policy is implemented. “I think cryptocurrencies will be the twelfth sector of the S&P. When institutions start indexing it, we will pay 20-30% more. That’s the big debate that’s happening at this conference.”

In the case of O’Leary, while some members of the crypto community may find institutional players intrusive, Henri Arslanian, senior crypto advisor at PwC, told Cointelegraph during the conference that the crypto ecosystem should welcome institutional entry, And noted that these centralized players provide the maturity and experience needed to work with institutional investors. “It’s good for the entire crypto ecosystem,” Arslanian said.

Scaramucci further told Cointelegraph that cryptocurrencies are still in their infancy, but he predicts that the market will experience major innovations in the next five years. “In the long term, I’m excited about everything going, but in the short term we’ll be witnessing headwinds due to COVID-19, the war between Russia and Ukraine, inflation and the specter of supply chain issues,” he said. Scaramucci added that he believes FTX will be the most transformative player in the entire space because “their mission is to transform the entire financial ecosystem by tokenizing all markets.”

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If you cover, they will come

Meanwhile, the Bahamas seems likely to be the world’s next crypto hotspot. While FTX moved its headquarters from Hong Kong to the Bahamas in September 2021, more crypto firms are expected to do so. Bahamas Prime Minister Philip Davis told Cointelegraph that the country has a regulatory regime in place and recently released a framework of policy white papers to help crypto businesses understand how to operate in the country:

“This will help companies understand how they can grow and prosper and what we can expect from them. The policy also takes into account concerns about cryptocurrencies and the risks associated with digital assets. The policy is implemented to protect consumers and the space integrity while ensuring we minimise all risks that may be associated with businesses here.”

Scaramucci said he believes the Bahamas is emerging as a crypto-centric region that will be known as one of the most “forward-looking and economically forward-looking countries” in the next five years. Arslanian added that crypto-friendly jurisdictions in regions like the Bahamas and Dubai have an opportunity to become global hubs by attracting top-performing crypto companies. “These jurisdictions are clearly focused on the future of crypto,” he said. On the other hand, Arslanian noted that the U.S. still lacks regulatory clarity when it comes to cryptocurrency innovation:

“I moderated a panel prior to my interview with Chris Giancarlo, former chairman of the CFTC. I asked him how he would rate zero to 10 cryptocurrency regulations in the U.S., and he answered zero. Jurisdictions are flexible , but they also need a willingness to accept cryptocurrencies.”

In terms of understanding how the U.S. can improve cryptocurrency regulations, Arslanian explained that Dubai’s model, such as the newly established Dubai Virtual Assets Regulatory Authority (VARA), may help other regions implement it.

“VARA is a professional cryptocurrency regulator, so they know this vertical very well. We need more regulators in other regions that specialize in this policy.” While VARA is a recent innovation, FTX this year In March, it expanded its operations in the United Arab Emirates by obtaining a virtual asset trading license granted by VARA in Dubai.

Cryptocurrencies Are Going Through ‘Regulatory Madness,’ But The Future Is Bright

Overall, regulatory developments in the cryptocurrency industry were widely discussed at Crypto Bahamas. For example, stablecoins and central bank digital currencies (CBDCs) are a hot topic.

Sheila Warren, CEO of the Crypto Council for Innovation, moderated a panel discussion titled “The Future of DeFi: Inside the Construction of a New Financial System.” Warren told Cointelegraph that the next two to three years will determine the trajectory of future generations of Web3 and blockchain technology, given the innovations currently taking place in the crypto space.

“The biggest threat right now, and the biggest opportunity for cryptocurrencies, is in policymaking. We now have evidence and hard data on how technology can achieve the public policy goals we all agree on, which is important to society,” she said.

Regarding stablecoins and CBDCs, Warren explained that both can play a role in the financial system according to different use cases. “CBDC might make sense in a closed financial system, but for the most part, I’m still skeptical about CBDCs beyond interbank settlements and cross-border payments.” By contrast, Warren sees stablecoins as being used for There is huge potential in programmable money. she says:

“The role of stablecoins is critical. For example, I think USD Coin is one of the most important innovations we are seeing in the ecosystem right now, providing a bridge between different assets while enabling smart contract programmability “I’m bullish on stablecoins, but I want to see how the regulatory environment treats them – it’s important to our entire ecosystem.”

O’Leary believes that the first crypto-friendly policy the US will adopt will focus on stablecoins. He believes that will be the case due to the Stablecoin Transparency Act, introduced earlier this year, which aims to audit stablecoins on a 30-day cycle.

“This is similar to the money market accounts that Fidelity and Schwab have, so they see it as a way to bring transparency to stablecoins. Assuming USDC is the first stablecoin to get this license — others will soon be Do that,” O’Leary said.

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Such regulations could have a transformative impact on the traditional financial sector, he added. “For example, in foreign exchange, I am now overrun by fees because when I buy European stocks, I have to convert dollars into euros or pounds. But with stablecoins, there is more transparency, less Frictional and auditable. I can transfer money in seconds,” he explained.

O’Leary further noted that stablecoin regulation legislation may come after the U.S. midterm elections scheduled for November 8 this year. “There’s going to be a change in leadership,” O’Leary said. Warren added that the crypto industry is currently witnessing a “regulatory frenzy,” noting that there is no jurisdiction currently not focused on crypto innovation, “This is the most important endeavor of our time. We are currently laying the groundwork for the evolution of cryptocurrencies. .”

To put this in perspective, Scaramucci told Cointelegraph that retirement plan provider Fidelity Investments announced that 401(k) retirement savings account holders could choose to invest in Bitcoin (BTC), a seismic event in the push for crypto regulation. “I predict Fidelity will do for Bitcoin and possibly other cryptocurrencies, as it did for the U.S. stock market in the 80s and early 90s. Fidelity has $2.4 trillion in retirement accounts in custody, so Imagine a fraction of that going to Bitcoin.”

Scaramucci also revealed that SkyBridge will soon offer its employees a Bitcoin retirement option plan. However, he noted that Bitcoin exchange-traded funds (ETFs) within the U.S. are the biggest elephant in the room right now. “I hope we will see Bitcoin Cash launched by the end of the year. If that happens, it will force all major financial services companies to continue offering Bitcoin Cash.”

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