The method by which financial transactions are conducted is changing. For some time now, people have been moving away from cash, but now, there is a newly added layer to payments, which is digital currencies. Not only are people becoming more used to the idea, but banks and other companies are starting to adopt the technology as well. For example, JP Morgan Chase is attracting platforms that are looking to begin using digital currencies. Facebook and IBM are but two examples.
There has also been an increase in dialog concerning digital currencies. Recently, a panel discussion was held at Sullivan & Worcester LLP, a New York City law firm. The discussion, entitled Token Exchanges: The Promise of Liquidity, Compliance and Stability, entailed going over the areas that are worth watching in the financial arena for the years of 2019. Joel Telpner, a partner and chair of the Fintech and Blockchain practice at the firm led the discussion.
He first discussed the status of digital currency, which can be described as “turbulent.” He stated,
“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.”
He also pointed out that the challenging times is what differentiates the appropriate players from those who are not. He added,
“We’re at the end of the beginning. 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.”
Even with the turbulence though, the industry is still on course, but the big question that arises is where that course is going. It is difficult to determine the future of the industry, especially in light of the question relating to government policies. According to Telpner, there are three areas to keep an eye out for when it comes to regulations.
First, even though the SEC may seem behind when it comes to regulations on digital currencies, it is not as behind as most people think. The SEC is preparing to provide guidance and clarity in the area. As a result, an announcement could be released at any time regarding digital currency and whether they are classified as tokens.
Second, the Commodity Future Trading commission may become more involved in tokens. The commission’s involvement may depend upon the SEC’s findings concerning digital currencies.
Third, industry experts find that stablecoins are neither commodities nor securities. As a result, there may be more guidance soon concerning whether stablecoins and how they should be regulated.
The discussion then continued to the concept of jurisdiction and that there is a favorable jurisdiction. However, Telpner warned that
“because all countries working hard to regulate this space. Stop chasing jurisdiction.”
Then, Telpner discussed tech players that are working together with legacy companies to promote the industry. There are a number of firms that are collaborating together, which can further help to define the space.
Finally, he added
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.