Why Bitcoin Regulation Takes Us From Now To Next

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Why Bitcoin Regulation Takes Us From Now To Next
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EVP, Financial Services, Dave Donovan, on why cryptocurrency, and bitcoin regulation will serve to benefit the financial services landscape and wider society both short and long term.

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Bitcoin Regulation Is A Long Term Win For Everyone

Right now Bitcoin is volatile because it’s not being regulated, which scares away various institutions that could stand to benefit from using Bitcoin for a plethora of reasons (i.e stocks, collateral, etc.) Overall, increased regulation of cryptocurrencies, and specifically, bitcoin will benefit everyone.

You could use smart regulation to help users and institutions safeguard their wealth. Doing so will increase stability while driving up the value and price of Bitcoin in the long term. The formula is simple, greater investor protection makes for greater confidence which begets a larger user base, thus driving up Bitcoin demand and ultimately price. This potential sequence of events precipitates an environment that encourages larger institutions to get off the sidelines and join the existing Bitcoin user base due to increased certainty in investor protections.

But that’s not all larger institutions need. They will also require greater transparency to trust not only Bitcoin, but the activities and transactions underpinned by Bitcoin such as borrowing, lending, custody, and everything else we currently do with dollars which have serial numbers.

Stable Coins Backed By Treasuries Must Lead The Way

Stable Coins, or currencies that derive their value from an external source such as legal tender, a commodity, or other collateral, are a form of cryptocurrency. In theory, Stable Coins backed by treasuries potentially offer the best of both worlds, with the blockchain underpinning speed, cost efficiency, and transparency, while the treasury backing offers the stability needed.

Well-documented and transparent exposure can ease current anxieties around Stable Coin cryptocurrencies. These assurances are necessary and preferable to stable coins backed by commercial institutions, which are subject to the effects of a liquidity event due to Stable Coins only being as valuable as the collateral that values them. This relationship could create demand for the wrong reasons which, again, points to regulation as a stabilizing solution. Another clear way to guard against system risk would be to agree on a global Bitcoin standard.

Decentralized, Democratized Banking Frees People To Transact More

We understand Bitcoin as a store of value, and blockchain as the system which underpins that store of value. To unlock a greater user base, Bitcoin should continue to appeal to the unbanked and underbanked, as Bitcoin can democratize global banking. This occurs because blockchain is a middle man eliminator across industries, all you need is an internet connection and a phone to get in the game.

Moving Money Should Be Free

Functionally speaking, it’s almost as if the internet didn’t happen for the financial services industry twenty years ago. We digitized the functions but didn’t digitize the protocols themselves. We had clean and clear interfaces underpinned by the same old ACH payment rails which take 3-4 days to clear and cost a fortune in fees. The bottom line is that moving money should be free and easy. The real magic in Bitcoin and new financial systems is the lives that will change. Think of all the gig workers, landscapers, dishwashers, warehouse workers, and immigrants who came to this country and do the jobs which underpin our enjoyable way of life.

Why should we be taking away money that they’re trying to send back to their families abroad? Why do we hit those living check-to-check with overdraft fees due to ACH rail hold-up? Why can’t we front them with the money they’ve shown us they have and will continue to have? For the sake of economic certainty, and with the blockchain-enabled protocol solutions we have available, these hold-ups and fees should no longer be tolerated. Newer systems exist that allow us to move money more cost-effectively and with greater speed. Regulation is key to those systems taking root. Through blockchains protocol transparency, increased user confidence, mainstream adoption, the democratization of global finance will stimulate increased commerce. Regulating Bitcoin and other cryptocurrencies will bridge us from now to next.

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David Donovan, Executive Vice President, oversees Publicis Sapient’s entire financial services portfolio for the Americas. He is responsible for setting operational and marketing strategies for the firm and managing relationships with top global investment banks. Donovan brings 25 years of expertise working on Wall Street as an institutional equity trader, including 14 years as the sector leader of technology trading for Fidelity Management and Research, when working with investment banks and asset managers.
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