EP005 Cryptocurrency Regulation with Jamie Zammitt
April 27, 2021
To get into general mainstream investing, for example, shares, Exchange Traded Funds (ETFs), commodities and even property, there are a fair amount of hurdles and Government regulations to get through in order to participate. In countries where proving your identity and asset ownership is even harder due to the lack of documentation, official records or changes to those records due to Government regulation or corruption it is virtually impossible.
You'll find yourself needing to trade or invest in the Local Government's desired currency such as the USD to trade certain commodities, for example, oil, or you may need large sums of cash to participate or you may be completely blocked by Government legislation, such as Australia's decision to block external investment into Australia based on sovereignty and security conversions.
Coinbase is one example of a cryptocurrency exchange that went for the regulatory path. In its early days its founder, Brain Armstrong, wanted to make Bitcoin and other cryptocurrencies less scary. There were a lot of questions around if it would be legal and if it would be banned altogether. Banks avoided anything with the word Bitcoin in it, so if you were trying to set up a Bitcoin-related company, it was virtually impossible and bridging the current financial systems with the new just wasn't happening
This is where Armstrong met with financial regulators and explained to them what Bitcoin was to make them comfortable with it. In bitcoin circles with was quite controversial. Coinbase wanted to work with the mainstream circles and work against what Bitcoin was invested to do. Bitcoin was supposed to avoiding the banks.
But working with regulators paid off over time and Bitcoin was much more accepted as time passed. You could think of Coinbases's decision to work with banks as oppsed to working against banks back in 2012, paved the way for how cryptocurrencies in general are more so accepted now in many Countries.
Coinbase's public listing was a huge step forward for the acceptance of cryptocurrencies by the mainstream markets and I'm sure we'll see much more movement and interest in it as time goes on.
This type of regulatory work, acceptance by the mainstream investment firms is all paving the way for Cardano, a third generation blockchain technology to step forward into the space.
With the current Biden administration in the United States Government, it is predicted that we'll see stronger regulation in the form of taxes to the cryptocurrencies markets with an increase of capital gains tax increasing from 20% to 43.5%. As quoted by Charles Hoskinson,
There is no reality, that a Government as regulation friendly as the united states government will allow an industry with a market capitalisation of over 1 trillion dollars to be unregulated or to live in this weird grey area of enforcement.
Chales Hoskinson AMA on regulation - https://youtu.be/nQR9nI9z_M4?t=53
But with the regulation, in the United States, we will see clarity around asset classification, the definition of a utility token, clearly defining securities law, defining roles and responsibilities of entities.
Cardano was built for flexibility as it is a global financial operating systems and not one country financial system is the same as the other. It's impossible to build a protocol and platform to fit all these different financial systems. Cardano is the unregulated base layer with monetary policy, control philosophy, update and grow, and for regulated activity, create a framework for the people that are participating or needing that framework makes their Government comfortable. To do this, Cardano has an identity management system, Atala Prism, to enable Know Your Customer (KYC) processes and Anti Money Laundering (AML) processes.
Regulated DEX where all addresses that come in are authenticated and whitelisted as a part of the KYC AML.
At some point in the future, you will be able to create a token and use it as a voting system, just like how ADA has a voting system with its inbuilt Governance layer.
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