Bitcoin is in danger of losing its value and with it, the opportunity of becoming a global digital currency. Its purpose, position, and influence is decreasing and unless something changes, it will be relegated as a database or other IT function. It is no secret that confusing regulation and unforgiving enforcement is killing the crypto market. Investors, developers, users, and even YouTube podcasters are walking on thin ice in fear of being accused or investigated for securities-related violations. The lack of a comprehensive legal framework, high transaction fees, and real case uses is threatening the continual existance of the entire ecosystem. A reversal of all these factors is necessary in order for crypto to resurge in prices and adoption.
Token Taxonomy Act
On Dec 20, U.S. congressmen Warren Davidson and Darren Soto introduced legislation in an attempt to salvage American interaction with the crypto markets. The proposed laws seek to legally define the nature of digital assets and exempt them from securities status. In addition, it attempts to minimize taxation of buying, selling, trading, or using cryptocurrencies. Even though the bill contains ambiguous terms for governance and consensus, it addresses the main point if contention between the SEC and the crypto community: whether crypto tokens represent an interest in the company. The wording specified that digital tokens are “not a representation of a financial interest in a company, including an ownership or debt interest or revenue share.”
Over-The-Counter (OTC) trading is one of the major causes for the demise of the crypto market. According to research by the Taab Group LLC, the OTC market volume is approximately twice the size of legacy crypto exchanges. And according to Skew market data index, crypto exchanges transaction premiums can be as much as 10%; making buying crypto on exchanges much more expensive than purchasing using OTC brokerages. This loss of volume significantly impacts the price performance of crypto. In other words, the more crypto sold over the counter at lower cost, the more the crypto market will suffer. Therefore, in order for prices to rise, exchanges must reduce or eliminate transaction fees.
As the ICO money frenzy wave recedes, real world applications of crypto technology begin to emerge. Among these is the consortium or multi-stakeholder approach. This is a concept where multiple parties join together to develop a blockchain solution to address a common problem. One such case is the Mobility Open Blockchain Initiative (MOBI). A coalition of over 30 car manufactures working to develop a Smart Car system to mitigate traffic and share data. The system will embed a crypto wallet, cryptocurrency, and associated systems in order to achieve car to car transactions in regards to travel speeds, right of way, traffic conditions, weather, etc. The system will also generate massive amounts of user data that will can be marketed for profit. This will help boost the token economy and accelerate the implementation of the Internet of Things.
Interest in crypto remains very strong. Corporate and public sentiment is still bullish and both sectors wish for the market to make a comeback from its current lows. Lenient legislation and congressional support represent the best chance to save Bitcoin from the abyss. And It will give crypto much needed room for projects to re-structure themselves without fear of being shutdown.
Also, more joint programs are necessary to share costs and reduce expenses. Lastly transaction costs must disappear in order to make exchanges more competitive with over the the counter markets. Fee-less exchanges like Robinhood must overtake expensive ones like Coinbase.
All these measures are crucial to make crypto a more effective and efficient space. If applied, Bitcoin will have a fighting chance not only to survive but thrive in the future.