Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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Will Global Regulation See Bitcoin Surge in 2023?
November 21, 2022
Regarding the price of Bitcoin and most cryptocurrencies in general, 2022 has been a rough year, especially compared to the phenomenal price performances of 2020 and 2021. Naturally, millions of people are keen to see what 2024 will bring, especially for BTC.
Among various market experts' crypto circles, there is increasing talk of a Bitcoin price surge coming. Its foundations are predicted to come from a rather unlikely source, increased global regulations.
Previously, increasing government regulation spelt bad news for cryptocurrency. But now, it could have the complete opposite effect. As cryptocurrency regulation grows worldwide, many expect that new governmental frameworks could play a huge role in increasing the credibility of Bitcoin and other cryptos and dramatically increase their value.
Out of all cryptocurrencies, Bitcoin is the one almost everyone has their eye firmly on. The first cryptocurrency in the world, it has a staggering market cap of $390 billion, is worth more than triple that of Ethereum and trumps every altcoin out there. Naturally, it is often the most recognisable name and the go-to choice for crypto newcomers.
But 2022 has not been kind to Bitcoin. Between 2020 and 2021, the price surged from $5,000 per coin to more than $60,000. Making many people richer than they ever could have imagined practically overnight.
But this year, In the wake of the pandemic, war in Europe, and increased global volatility, the price has fallen dramatically, losing over 70% of its value and thus characterising the volatility of crypto.
Of course, the precarious state of the world has also seen some of the most stable blue-chip stocks plummet too. But unlike these, BTC doesn’t have the same level of credibility amongst the mainstream investment audience. But 2023 could see a dramatic change in this area.
To be accepted by a mainstream investment audience, it’s widely said that there are six main expectations that cryptocurrencies need to meet:
- Durable ✔️
- Portable ✔️
- Divisible ✔️
- Fungible ✔️
- Scarce ✔️
- Widely accepted as a form of payment ❌
When it comes to Bitcoin, the original cryptocurrency largely ticks the boxes on the initial five necessities. However, its stumbling block is becoming a globally accepted form of payment.
However, 2023 could see that box finally ticked.
Almost every form of investment, be it fiat currency, properties, commodities, etc., is regulated in some form. Bitcoin has largely avoided it so far, but this may end soon. But fear not; this may not be a bad thing at all.
In fact, it could be the final push needed for Bitcoin to finally achieve widespread use and adoption.
A change that will likely make its price surge higher than ever before. Now, let’s look at some of the most promising regulations in the crypto pipeline from global governments from the UK to Saudi Arabia and what it means for Bitcoin and crypto as a whole!
Bitcoin Regulations In The United Kingdom
From one of the shortest reigns of any prime minister to the loss of value in the Great British Pound, the political scene in the United Kingdom has been a rollercoaster in recent months and not a very fun one.
Britain’s latest prime minister, Rishi Sunak, is a former banker from Goldman Sachs. So if there’s one thing he knows well, it’s economics. Due to various political scandals and mishaps, public opinion is divided over Sunak’s ability to lead the country.
However, when it comes to crypto in the UK, things are looking bright. Rishi Sunak has revealed his ambitious aims for post-Brexit Britain to become a hub of crypto-related business similar to that of the Baltic states.
So much so that a recent UK government voted to add digital cryptocurrencies to the scope of activities to be regulated via the newly proposed Financial Services and Markets Bill.
In an additional boost for crypto, the Financial Conduct Authority has recently updated its advice and advises that crypto should be limited to 10% of a diversified portfolio. Previously, they advised avoiding it altogether due to its volatility.
Where Should You Invest In Bitcoin In 2023?
Naturally, reading this article and realising the promising future that lies ahead for the likes of Bitcoin and other cryptocurrencies, you’re no doubt wondering how to invest in Bitcoin for the future. Well, as we come to the end of this article, allow us to share some advice with you.
Worldwide, there are several ways to invest in cryptocurrency, but not all of them are equal. Surrounding an elite group of exchanges and trading platforms is a minefield of scam platforms and illicit exchanges, which you should avoid at all costs.
Instead, opt for a popular and varied platform that is well-suited to beginners, such as eToro, Kraken, or Bitcoin Loophole. These platforms also come with a range of useful trading tools that you can use to streamline your crypto portfolio and build an investment for the future.
The Securities or Equities Question in The United States
The United States is home to a huge community of cryptocurrency investors. Around 22% of the US adult population (46 million people) own some Bitcoin. In fact, recent statistics have shown that most millennials surveyed believed that Bitcoin is superior to gold as a safe-haven asset.
Naturally, crypto regulation is becoming an increasing topic of discussion in the US Senate. Gary Gensler, the Chair of the Securities and Exchange Commission, has said that those who invest in cryptocurrencies should be granted the same protections as those who invest in mainstream equity.
Gensler has also made his opinion clear regarding a crypto market that offers protection to those who invest in it. By doing so, the market will produce more confidence, draw more investors, and become stronger overall.
The US Government is currently debating how to classify Bitcoin and other crypto assets. The question is whether they should be treated as equity-like securities or gold-like commodities akin to gold.
It’s a difficult question indeed, as various cryptocurrencies share the characteristics of both investment forms. Many have argued that the classification should determine whether a particular crypto asset uses a proof-of-work or proof-of-stake protocol.
Once this question is answered and the issue is settled, retail investors will undoubtedly feel much safer and more confident about investing in crypto. In turn, we could see a huge wave of investment towards Bitcoin and other crypto assets that will undoubtedly skyrocket.
The European Union’s New Licencing Regime
Another major player in the future of Bitcoin and the wider world of crypto is the European Union. A vast collection of 27 countries, whatever decisions toward crypto regulation made at the top of the EU have a huge effect on the wider world of cryptocurrency.
Recently, the EU agreed to establish a cooperative licensing authority regulating various cryptocurrency exchanges such as Binance, Kraken and Coinbase.
The general plan is for all cryptocurrency exchanges to have the ability to seamlessly operate across the borders of countries that make up the EU within an agreed Crypto Regulation Framework.
Anti-Crypto Asia Is Changing Its Mind
From China to India, quite a few governments in countries across Asia have demonstrated an inherently anti-crypto stance. However, the progress of technology and widespread adoption is hard to fight, and many countries are beginning to change their minds.
Take India, for example. In recent years, the Central Bank of India has blatantly branded cryptocurrency as nothing more than a Ponzi Scheme. More recently, the Indian Directorate of Enforcement decided to freeze both WRX and Tether underneath India’s Prevention of Money Laundering Act. Despite this, it’s believed that more than 7% of the enormous Indian population of 1.4 billion own some form of crypto. That’s almost 10 million people!
And then there’s China. When one of the biggest countries on earth imposed a full-on crypto ban, it sent shockwaves across the cryptocurrency industry. But in the iconic investment hub of Hong Kong, things are looking promising.
Elizabeth Wong is the chief of fintech at the Securities and Futures Commission and recently informed investors that the government is contemplating authorising people to invest directly in digital assets.
It’s believed that this is some form of reconciliation that is aimed at attracting fintech investors back to Hong Kong in the wake of mainland China’s violent crackdown on Hong Kong protestors.
Saudi Arabia is Bringing Change to Crypto Investing in The Middle East
Across the predominantly Islamic countries of the Middle East, religion often plays a significant role in the governance of money and finance. To stay in line with Islamic law, many countries across the Middle East have been naturally cautious about cryptocurrencies due to the question of whether they’re Halal or not.
However, one country, in particular, is at the forefront of changing this. Interestingly, it’s one of the most surprising countries one could think of due to its notoriously hardline religious society: Saudi Arabia.
Officially, the government in Saudi Arabia banned the country's bank from processing any form of crypto transactions. But, as with anything, there are numerous ways to get around it, and many Saudis take full advantage of them. By the Spring of 2022, surveys showed that 14 per cent of the adult Saudi population (3 million people) either currently owned crypto or had at least actively traded in the last six months.
There’s increasing talk of the neighbouring United Arab Emirates making steps to become the main hub of cryptocurrency in the Middle East. Not wanting to be outdone by their neighbour, many believe that regulations will be loosened in Saudi to allow cryptocurrency activity to flourish. Binance has already got its foot in the door in anticipation of this news and has increased its number of Saudi-based staff.
Even more promising for the region is an increasing number of religious leaders declaring that cryptocurrency is permitted under Islamic law. Plus, the Kingdom of Saudi Arabia is also making plans to form a multi-regional CBDC under the name ABR.
International Monetary Fund (IMF)
And last but by no means least is another financial powerhouse that is predicted to play a huge role in the global acceptance of Bitcoin and other crypto assets: The International Monetary Fund (IMF).
Recently, the IMF released their World Economic Outlook Update Report that was largely encouraging to the crypto sector and stated that, despite the enormous sell-off across the cryptocurrency market in the wake of price dips, there had been limited fallout on the wider financial system overall.
In contrast, there was more negative attention directed towards stablecoins. Tobias Adrian, IMF director of monetary and capital markets, stated that stablecoins like USDT threaten investors due to their characteristic nature of not being backed one to one.
Overall, rather than focusing on cryptocurrencies like Bitcoin to further regulate them, Adrian predicted that regulators will place their focus on crypto exchanges and those who provide digital wallets.
In Conclusion, Regulation Could Mean a Bright Future For Bitcoin!
Previously, the lack of government regulation was a huge selling point for BTC and was a huge help to draw more investors to the asset and increase its value. Now, it’s widely accepted that Bitcoin needs to advance into the future and become a globally accepted form of currency.
But to achieve this, governmental regulations are inevitable, and it’s happening as we speak. Some may say it’s a bad thing that goes against the very principles of cryptocurrency. But, overall, crypto needs to advance.
Plus, as the range of crypto regulation advances worldwide and the use cases, credibility and acceptability of the likes of Bitcoin grow in sync, we could naturally see its price surge in 2023 and beyond.
See: MiCAR: EU Crypto Regulation in the Making
But of course, only time will tell, and nobody can truly tell what the future has in store for Bitcoin and other cryptocurrencies. This means that you shouldn’t take this article as a form of financial advice.
If investing in cryptocurrency for the first time, always conduct deep research into the market, consult with a financial expert and never, I repeat never, invest more than you can afford to lose.
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