More regulation = more investment
On Oct. 12, finance ministers and central bankers from the G20 nations met in Washington, D.C. Their agenda included regulation of crypto markets under proposals from the International Financial Stability Board (FSB) for global standards. The prerequisite for this is that the authorities of the G20 countries are given the necessary powers to initiate regulatory measures. Following on from this, a single framework is designed to prevent a threat to financial stability from a growing crypto market. To ensure compliance, cross-border regulatory cooperation is recommended.
Modeled after the EU, global-level implementations are to be put in place that crypto service providers must adhere to. This is intended to combat money laundering and terrorism. In Europe, for example, transactions with a volume of 1,000 euros or more must be reported and the identity of the payment participants verified.
The crypto providers most targeted here are those that have several services converging. Providers such as Binance or Bitpanda, for example, are in focus and are to be regulated more closely. If these “big players” do not comply with the rules, they may even be broken up and their services redistributed among several smaller companies. The extent to which the measures will be implemented globally or nationally remains to be seen. The EU has already made a push here with the MiCA regulation.
Regulations encourage investment
A recently published study shows that stricter and globally applicable regulations can increase investors’ propensity to buy: It was conducted jointly by management consultancy PwC, AIMA (Alternative Investment Management Association), Elwood Technologies and asset manager CoinShares. According to it, the interest in cryptocurrencies is unbroken. The respondents were mainly institutional investors, who have considerably larger trading volumes than the average crypto investor. Large funds are also the ones that can cause a trend reversal and significant price changes.
According to the study data, about half of the current 300-plus crypto hedge funds were launched in the last three years. Market-neutral strategies predominate among investors’ strategies. Compared to last year, more hedge fund managers are investing more assets in cryptos – but they still only make up a small portion of the investment volume. However, this is set to change, as the authors paint a positive outlook: 67 percent plan to invest more in the future.
Among managers who have not yet invested in cryptocurrencies, 16 percent say they already have concrete investment plans for the current year. A total of 41 percent of the managers surveyed are completely against cryptocurrencies – a decrease of 16 percent compared to the previous year. Interesting in this context is the overwhelming majority of 83 percent of respondents who stated that they do not invest in cryptos due to the lack of regulations. Perhaps this will change with the initiatives of the UN, G20 or EU.