This is one part of a multi article report. Check out the other parts on the potential financial gains Lawyers, Accountants, Exchanges, Bankers, Traders, Brokers, Financial Regulators stand to make as well as the potential landfall increased tax revenue as a result of mainstream Bitcoin. This multi part series should make the case that these groups and interests will in fact help make Bitcoin and cryptocurrency to become mainstream, and aim to sell, service and otherwise profit from cryptocurrency and Bitcoin once they help it become as ubiquitous as stocks, bonds and mutual funds.
Part 1: Did The Financial Industry Miss Out On Mainstream Bitcoin?
There are a lot of people who are skeptical of Bitcoin, of cryptocurrencies and of blockchain technology in general. Skepticism is a natural and instinctive reaction that has kept humans alive since our inception. Because the skeptical reaction instinct often times resulted in survival for early humans, it can be argued that it is not a bad thing to be skeptical when you first see something new. There is a big difference in being skeptical at first and continually ignoring something that could be beneficial to you because you fail to explore it. In this multi part report we will discuss the financial gains lawyers, accountants, exchanges, bankers, traders, brokers and financial regulators stand to make as well as the potential landfall increased tax revenue created as a result of a mature and mainstream cryptocurrency industry. This multi part series should make the case that there is too much to gain financially for these groups to want cryptocurrency and Bitcoin to fail. These groups will in fact help cryptocurrency become mainstream and they will aim to sell, service and otherwise profit from cryptocurrency and Bitcoin once they help it become as ubiquitous as stocks, bonds and mutual funds.
The United States has come a long way since the first traders met literally underneath a buttonwood tree in New York City to begin trading as we know it today. I’m sure as people walked by emptying their equally literal piss pots, they were skeptical. Fast forward to today: New York City is thriving and known to many as the financial capital of the world. Nearly incalculable sums of money are thrown around every hour of every day. One segment of that money, investments, are of particular importance to cryptocurrency. You see, cryptocurrency is currently painted as wildly speculative, extremely risky and volatile. Many would caution you to stay as far away from them as possible. The same people, institutions, media outlets and banks that are telling you to stay away from Bitcoin and cryptocurrency are going to turn right around and try to sell cryptocurrency and crypto related services to you within a few short years.
Much like the early traders under the buttonwood tree, we’re ahead of the curve. Unlike the buttonwood traders and luckily for us, it won’t take 200 years for Wall Street to develop to a point where they can profit wide scale from the masses by creating and packaging new financial products to sell. The systems are currently in place for a rapid roll out of cryptocurrency and Bitcoin products. So what’s stopping this from happening now? One answer could be inventory. The current day Wall Street behemoths do not have enough crypto and Bitcoin inventory to push it quite yet.
Bitcoin is not a simple technology. As such it takes time and effort to learn enough about it to understand it. On top of that, it’s distribution method, mining, is open to any and all people. You simply have to be interested in mining, do a little bit of research on how to set up a miner and have the equipment which was initially just a computer, electricity and internet connection in order to mine Bitcoin. This resulted in a minority of people mining Bitcoin, people who were generally interested in computers or cryptography. Unless Satoshi Nakamoto is a government entity or affiliated with Wall Street or a bank, the majority of Bitcoin is in the hands of non traditional financial industry players. Bitcoin simply flew under the radar for the period of time (2009-2014) when it was easiest to accrue due to low mining barriers (low hash rate) and cheap price. As a result when Bitcoin started its most recent growth frenzy, Wall Street for the most part was on the outside.
Now that Bitcoin is a household name, it would be perfect for Wall Street to start selling it, making fees off of the sale, financial products such as cryptocurrency index funds, and as part of retirement accounts. Almost any financial product sold on Wall Street today could have a Bitcoin or cryptocurrency version being sold right alongside it. The problem is Wall Street doesn’t hold enough Bitcoin and other cryptocurrencies to create these financial products. Why else would Wall Street let Coinbase make over 1 billion dollars in revenue last year? One theory is if traditional financial industry players could have made the money instead, they would have. However, Coinbase took the early risk and as a result is in the lead by a long shot, poised to continue it’s exponential growth into the future. Coinbase was able to build their stash of crypto assets like Bitcoin to power their exchange when those assets were much cheaper to acquire and as a result is cashing in on the seemingly endless fees available as a result of cryptocurrencies boom.
Another theory would be Wall Street wanted someone like Coinbase to take the risk. Once a group like Coinbase did the hard work of getting it all started and getting cryptocurrency to catch on, Wall Street could swoop in and take over. Coinbase will certainly face a great deal of lawsuits and issues with financial regulators over the next few years, and the fact is that just one court case or issue could be fatal for the dominant cryptocurrency exchange. The result of just one bad outcome in court or with regulators could result in the total shutdown of the cryptocurrency exchange.
This isn’t the only role financial regulators have to play in the cryptocurrency space. Let’s take a look at the reach, breadth and power of financial regulators by looking at just two groups, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). It is important to look at these two groups because they represent two very different groups in a large pool of powerful regulators. These are arguably two of the most important regulatory bodies in the United States financial system.
This leads us to the next part of the report, the role financial regulation has to play and what they stand financial regulators stand to gain. Click this link to read the full report including why attorneys, accountants, traders, bankers and financial regulators will benefit from a mainstream and robust cryptocurrency industry.
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