Three Bold Predictions To Track In The Digital Currency Frontier

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Written by Lauren DeLisa Coleman
digital currency
Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), speaks during a Senate Banking, Housing and Urban Development Committee hearing in Washington, D.C., U.S. Cryptocurrency exchanges may face more turbulence as the two top U.S. market regulators ask Congress to consider federal oversight for the trading platforms. Photographer: Andrew Harrer/Bloomberg © 2018 BLOOMBERG FINANCE LP

We’re in the midst of a massive shift regarding the manner in which we conduct financial transactions in our culture. Whether heated examination of the rise of a cashless society to debate about implications of universal basic income to new forms of encrypted currency; money, particularly as it intersects with heightened areas of our cultural values, has never been a hotter topic.  Such change is powered by advances in technology, in large part blockchain, and is enabling a provocative transformation of industry landscape and players. We are witnessing everything from traditional financial behemoths such as  JP Morgan Chase make fresh moves to new participants to the world of financial transactions such as Facebook preparing to enter the digital currency ring to tech stalwarts like IBM announcing powerful plays in payment. But amidst such vast activity around digital currency overall, there is a specific and growing interest toward trend shifts pertaining particularly to token exchanges.

This important space was recently examined at a panel discussion at a New York City law firm Sullivan & Worcester LLP and included prominent players in this new industry. The dialogue offered insights into a number of key areas to watch in this arena for the remainder of 2019.

Entitled “Token Exchanges: The promise of liquidity, compliance and stability”, the evening was led by Joel Telpner, partner and Chair Fintech & Blockchain Practice at Sullivan & Worcester. He provided opening remarks and moderated a panel that included Dan Truque, Head of Alternative Assets at Symbiont; Wilfred Daye, Head of Financial Markets, OKCoin and Evan Malanga, Director Of Business Development, Securitize.

Telpner first addressed the current turbulent status within the digital currency industry.  “We’re all collectively paying the price at the moment,  but it’s important to keep in mind that this is not a bad thing. Most all new forms of technology have experienced a high level of unreasonable exuberance in the early days and after that period, business becomes much more stable.”

Telpner also noted that such challenging times also create more appropriate players. “We’re at the end of the beginning,” he remarked. “This is about moving from the wild, wild, west to a more mature level of the digital currency space and tokens. Those that remain have to work hard and understand that success will come from fundamental principles in business and governance, and it will certainly pay off.”

Digital currency regulation

Telpner noted that the industry is currently more on course. But one could argue that the question still remains of where we are actually going.  While the future remains to be seen, there is no doubt that government policy around the token arena will play a large role. Thus, Telpner indicated his top three elements to watch for from a regulatory standpoint:

  1. There is the idea that U.S. is behind in regulations around digital currency, yet Telpner says that the country is not nearly as behind as much as people think. He noted that the SEC Commissioner is planning to focus even further on guidance and clarity in the space. Therefore, we should expect to see announcements soon from SEC on what forms of digital currency should be categorized as tokens and which should not. As we know, many tokens were used to raise significant capital and were not considered securities, and this will be one of the key areas to watch.
  2. The CFTC (Commodity Future Trading Commission) will become more involved in the token space given that this collective regulates commodities.  Telpner believes that many tokens are, in reality, most likely commodities. As more proof becomes available as to which tokens are, in fact, backed by commodities, watch for the CFTC to generate input on its thoughts and considerations.
  3. Stablecoins are neither commodities nor securities, according to industry experts. Thus, Telpner cautions to watch for a regulatory focus will specifically on how these specific forms of digital currency will be regulated in the near future.

Discussion during the evening also pointed to a belief that this year holds a particular focus on custody and what is needed to move to the next level in this part of the ecosystem from both a technology and regulatory standpoint.  In addition, there will also be an eye to how trade is conducted in this space and how securities are managed securities once they are issued.

digital currency
Joseph Muscat, Malta’s prime minister, arrives ahead of an informal meeting of European Union (EU) leaders in Salzburg, Austria. Malta has a country which is watched by those analyzing the complex intersection of cryptocurrency and jurisdiction. Photographer: Stefan Wermuth/Bloomberg © 2018 BLOOMBERG FINANCE LP

But one of the hottest debates in the industry will be that of a global nature as forerunners in the space seek to define the most favorable jurisdiction for the industry. “But this approach was wrong in 2017, 2018 and still wrong to think like this in 2019,” cautions Telpner, “because all countries working hard to regulate this space. Stop chasing jurisdiction.”

Telpner says that this is the case because all countries will be working to ensure the best level of long-term adoption and reaching such a goal most certainly means uniform policy.

During the evening, there was also the notion of a trend of tech players teaming up with legacy companies to drive further and faster was evident. For example, Securitize, flush from its announcement of collaboration with IBM the day prior to the event, spoke to such opportunities and challenges during the panel.

So what else can we expect for this dynamic space from the rest of 2019 and into 2020?

Telpner says that there will be infrastructure growth on digital securities side. Banks will be rolling out more development but there will not be any marquis deals on blockchain, per se. He believes that instead, we should be look for the next step in the evolution of stablecoins. But his last forecast of that evening might be the best of all.

Says Telpner, “Watch for more real business plans and insight and more startups with good old-fashioned management teams with true structure starting this year and beyond in the digital currency space. That’s a major change to track and a welcome one.”

This article originally appeared in Forbes.

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About Lauren DeLisa Coleman

Lauren DeLisa Coleman is a digi-cultural trend analyst, author and strategist. Her expertise is deciphering and forecasting power trends, public sentiment within the convergence of pop culture, millennials & emerging tech behavior and analyzing the impact on business, governance. Her sub-specialty is diverse demos, and she is a contributor to media outlets from Forbes to Campaigns & Elections, as well as a guest commentator on MSNBC. As an entrepreneur, she has provided strategic intelligence on projects from Snoop Dogg to Microsoft execs to public policy leaders. She heads Lnk Agency, a hot trend consulting & multimedia company. Her latest e-book is "Americas Most Wanted: The Millennial." You can read her Forbes contributions here: https://www.forbes.com/sites/laurencoleman/#3975218462c5
You can read her Inc column here: https://www.inc.com/author/lauren-delisa-coleman
www.ultralauren.com @ultra_Lauren
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