An entrepreneur uses new technology to enhance their operations or to develop new opportunities. The blockchain is currently an essential technology that allows transactions of cryptocurrencies, also known as tokens. Its effects have been felt majorly in the modern world.
Benefits of Cryptocurrencies
The tokenized exchange platform has enhanced the traditional financing platform by eliminating the middleman from transactions. It has also helped by bringing traditional financial instruments and compliance to the world of blockchain. Thus, many institutions in the world are shifting to the use of blockchain technology. It is an ecosystem that globally contributes to compliance, democratization, efficiency, and effectiveness of the market participants.
Reduced Fees
Most of the fees associated with financial transactions are a result of the payments done to the middlemen. Cryptocurrencies eliminate the need for third parties in transactions, thus lowering the costs. Also, contracts done smartly may reduce the dependence on hiring an attorney. These smart contracts can minimize the expenses, intricacy, and bookkeeping required by managing securities.
Prompt Transaction Execution
The longer the chain of processing the transactions, the more extended the period of having your deal executed. With the elimination of the middlemen by the blockchain technology, acceleration timelines for issuers are enabled to enhance their security. Therefore, investors and issuers are inclined to utilize this instant trade settlement.
Market Exposure
The traditional financial industry does not always offer exposure to global investors, unlike the cryptocurrency markets. Tokens allow asset owners to promote their deals to anyone connected on the internet. But, there are regulatory limits to this effect. The exposure contributes to change in asset valuation, thus eliminating possibilities of wrong pricing.
Enhanced Investor Base
With the possibility of presenting deals globally through an internet connection, attendance on an investor platform is radically increased. Investors then opt to trade internationally. It is a way to enhance their presence as well as grab more opportunities.
Compliance of Cryptocurrencies and Blockchain in Connection to Traditional Financial Instruments
Blockchain and cryptocurrencies are reliant on federal security rules. Since their initial existence in the market, they have been compliant. A major extent of adoption, regulatory and legal elements are behind the success of smart contracts.
Any industry with recognized regulators should determine the technique to use in adapting their roles to blockchain-based environments. They will have to commit resources to help them understand the technology and develop measures to support the developments. With the benefits that the new advancements are bringing, regulators are expected to support the blockchain network. It is believed that they will reduce the compliance costs and enhance transparency as they execute their oversight roles.
State Regulators
Federal regulators are familiarizing themselves on how blockchain technology works in securities and financing. They are expected to give statements that stand behind the innovations. Along with providing support, they will guide the players in the industry on what is legally permitted in blockchain development.
“The crypto space is evolving at a feverish pace, expanding into an ever growing list of blockchain-ized industries, however, the industry is still not what I would consider mature. Like most industries that begin to expand quickly into the public consciousness, it needs some structure, some guidance… essentially we need regulation, but we need a regulatory framework that helps us retain the innovative spirit of the space while helping us to protect the consumer and open doors to the traditional financial institutions, like banks, which will be a huge push toward mass adoption. The one caveat is that the industry needs to be a part of that framework or we risk getting regulated out of the very industry we helped create.” –Kevin Murcko, CoinMetro CEO
Smart Contracts
Smart contracts are a powerful tool used to perform blockchain transactions. They use computer code which automatically completes an authorized execution. The courts are yet to resolve the coding issue. A legal approach on how to treat smart contracts in the event of a dispute calls for regulators’ review.
Some states have enacted a law stating that a smart contract may not be denied legal effect or validity. There are amendments expected to take place in countries which have not ratified these intelligent contracts.
Global Compliance
International regulatory developments have to focus on the impact of regulators and possibilities for enforcement activities on cryptocurrencies. Some regulators welcome the processes as offering the necessary guidance on what is allowed in the blockchain market. Others feel that enforcing the law on cryptocurrency activities will hinder continuity and implementation of the blockchain technology. Enforcement and regulations to enhance compliance in the cryptocurrency world are underway.
