The cryptocurrency sector awaits significant adjustments to the regulatory landscape, primarily driven by Bitcoin exchange-traded funds (ETFs). However, one crucial aspect many observers are overlooking amidst the market hustle is the transformative effect of wide-scale institutional adoption and the consequential regulatory clarity.
Institutional involvement in the crypto world is pressing the need for straight answers from regulators on critical aspects like taxation and compliance. From defining what trades a company can legally execute, to how they ought to be reported, institutional players seek clarity that has so far eluded the industry.
For instance, issues like what constitutes a taxable event in the crypto world varies across jurisdictions. For a US trader trading on a decentralized exchange (DEX), calculating profit and loss (PnL) is a requirement for every trade. However, other countries adopt less rigorous approaches, with a handful opting not to tax crypto transactions. The stakes are even higher for businesses required to list their Bitcoin holdings for public scrutiny.
Consequently, institutional adoption brings more than just capital into the sector. In addition to providing markets with liquidity, these institutions carry a retinue of lawyers and lobbyists who are starting to make inroads with regulators. The ultimate takeaway is the regulatory certainty this involvement ushers in – a significant step given the constant tug-and-tug between the industry and regulators.
However, not everyone in the crypto field is filled with enthusiasm for the incoming regulations. While high-profile institutions like BlackRock draw the attention of entities like the Securities and Exchange Commission (SEC), there is apprehension over what regulations mean for the industry. While some of the provisions may serve the industry’s progress, others potentially may not.
The increased activity of bigger institutional players in the markets will likely result in more precise crypto classifications. The benefit is immense for every industry participant, as institutions drive clarity whilst legitimizing digital assets for regulators.
That said, with greater institutional involvement comes the potential for better regulations. While the rules may not favor all participants, the clarity ensuing from such involvement will allow crypto players to operate within set boundaries.
Source: Cointelegraph
