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What Stands in the Way of Global Cryptocurrency Adoption?

 6 min read / 

As outlined within a previous Market Mogul explainer article; a cryptocurrency (colloquially referred to as a ‘crypto’) is a digital asset designed to work as a medium of exchange and uses cryptography to secure the transactions and control the creation of additional units of the currency.

It’s first important to note that the market cap of the top cryptocurrency Bitcoin (BTC) is just north of $37bn and the second highest, Ether (ETH) is at $18bn. In addition, 24h trading volume for BTC is c $1.2bn and ETH is c$1.6bn, thus demonstrating that these cryptocurrencies are becoming a popular medium for investment, transactions and speculation.

There has also been a change in rhetoric around cryptocurrencies; away from the previous connections with Silk Road and Mt Gox and more towards the potential of ICOs and innovative cryptocurrency projects such as Monero and Golem.

Attention Grab

As such, cryptocurrencies are now beginning to capture the attention of hedge funds, banks and investment firms as a potential investment opportunity. Two recent examples of this are the announcement by Swiss private bank, Falcon, which will allow wealthy clients to store and trade bitcoins via their cash holdings, and Barclays who are speaking to regulators about bringing Bitcoin ‘into play’.

This is a significant move which could look to not only open up a potential high-risk, high-return investment for clients but also an additional revenue stream for the bank which, in-line with current market trends, is seeing squeezed margins due to market uncertainty.

However, before the portfolios of high net worth individuals and retail investors are diversified with cryptos, it is first necessary that regulation and definitions across markets are standardised.

In many countries cryptos are defined as a form of currency, for example:

  • Japan (legislated Bitcoin as legal tender in 2017)
  • Italy
  • France
  • Singapore
  • Russia
  • United Kingdom

However, in many countries they are listed as an alternative asset form:

  • China & USA – Commodity
  • India – Currently a commodity but looking to be regulated as a security
  • Germany & Philippines – Barter Good
  • Nigeria – Money
  • Poland – Property

And in some countries, bitcoin and other altcoins remain illegal:

  • Ecuador
  • Vietnam
  • The Republic of Macedonia
  • Kyrgyzstan

It is this lack of universal definition, as well as poor levels of understanding, which inhibits regulators from providing the guidance and legislation necessary for investment firms, and certainly banks, to be comfortable dealing with cryptos.

But whilst there are a plethora of conferences, breakfast meetings, whitepapers and PoCs being released in order to help boost cryptocurrency and blockchain understanding, there remains contention around how (and if) cryptocurrencies could/should be regulated.

The Philosophical Argument

One argument against regulation takes the philosophical route and looks to defend the vision of Bitcoin’s unknown creator – who goes by the pen name of Santoshi Nakamoto.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

Bitcoin’s original 2008 whitepaper

The above is the first line from Bitcoin’s original 2008 whitepaper and presents Bitcoin as an anarchistic method of finance, outside the control of financial institutions, central banks and regulators – for the people, by the people. As such, many Bitcoin purists are against regulation and look for Bitcoin to continue under caveat emptor (buyers beware).

The Distributed Model

A further difficulty of regulating Bitcoin, or other cryptocurrencies, is the distributed model which the underlying technology, blockchain, employs. As such, the ledger associated with the cryptocurrency does not exist on one server or in one location – it is distributed across computers, countries and continents. Therefore how does one attach a jurisdiction or set of legal parameters to the asset?

For example, under which country’s legal framework would a cryptocurrency holder residing in Italy, with cryptocurrency held in Poland and being transferred to a buyer in China, fall under?

In efforts to scale down the location problem, both the US and China have targeted cryptocurrency exchanges. Through January 2017, the Chinese government and People’s Bank of China (PBOC) worked with China based exchanges in order to improve Anti-Money Laundering protocols.

This led to a halt in exchange withdrawals and a dip in the price of bitcoin. A possible side effect may be improved confidence from other financial institutions as they see the PBOC is taking steps to mitigate the Wild West landscape. In the US, the New York State’s Department of Financial Services has a BitLicense which seeks to regulate exchanges directly and impose rules on record keeping and capital funds.


Public addresses associated with cryptocurrency transactions are pseudo-anonymous, meaning that unlike traditional bank accounts or financial transactions, auditors and regulators are unable to directly ascertain the sender and receiver of the funds. This introduces concerns regarding terrorist financing, money laundering and other nefarious monetary transactions (which many banks have been found guilty of previously) as well as possible tax evasion schemes.

As such, the Internal Revenue Service in the US recently subpoenaed cryptocurrency exchange Coinbase for customer account details. However where users may be required to register details with an exchange, those wishes to transact person-to-person do not require anything other than a public address, thereby removing the possibility of identification, and increasing the difficulty of regulation around Know Your Customer.

Variety of Categorizations

Finally, and as outlined above, the diverse categorization of cryptocurrencies across different jurisdictions makes it difficult to create universal regulations or guidance.

As such, Coin Desk’s Tim Enneking proposes a new term for the nascent technology – Cryptoasset:

“There are two problems with applying the phrase “cryptocurrency” to what’s going on in the space traditionally known by that name. First, the “coins” are acting less and less like coins and more and more like something else, perhaps equities.”

Tim Enneking

This may then better reflect the multi-use of cryptos and more accurately demonstrate their capacity as a tradable and investable asset. As such, a definition of ‘asset’ may better allow for frameworks to be put in place which support regulators such as the SEC and FCA. This may then allow for a more accurate assessment of the opportunities, risks and necessary regulations for new financial instruments associated with virtual currencies.


However until a standard classification is applied unilaterally, the piecemeal approach by regulators and countries will continue, with no overarching standard for crypto investment and trading, thus hampering the ability for cryptos to be consumed as a globally accessible asset class.

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