The cryptocurrency industry has been in the sights of regulators for some time. The latest chapter of this is a battle over who gets to regulate it: the U.S. Securities and Exchange Commission (SEC) or the U.S. Commodity Futures Trading Commission (CFTC).
The SEC says that it should be the regulator because cryptocurrencies are securities. The CFTC believes cryptocurrencies are commodities. What is clear is that it is difficult to categorize cryptocurrencies because they blur the lines between traditional categories of money, stock and commodities.
Many in the technology industry are concerned about regulation, no matter who does it.
“I think it requires thoughtful regulation, and it requires regulators who really understand the space,” said Marcus Krug, head of the SAP Innovation Center Network in Berlin and Potsdam. “But then, I think regulation can actually be a good thing.”
There’s a lot of potential riding on the space. To most, cryptocurrency — a type of blockchain — may be viewed as a tool for speculation or an early-stage payment system.
But many believe blockchain technology has the potential to supercharge innovation. Blockchain is a virtual computer that runs on top of a network of physical computers. Its main characteristic is that it is decentralized and can be open for all to see. This transparency helps to ensure that it will operate as it was designed to. As an open system, which usually requires no authorization to participate, the technology behind cryptocurrencies could upend applications that we know, build and use today.
“We’re looking at it from a whole ecosystem perspective,” Krug said. “There is a pretty mature technology stack right now that’s powering cryptocurrencies, and it’s turning into a more and more mature infrastructure and ecosystem for decentralized applications.”
The technology and ecosystem provide developers with new possibilities for building applications, which don’t require authorized intermediaries who see the transaction through its completion and providing a level of trust that the transaction will occur correctly.
This infrastructure is most popularly used for cryptocurrencies today.
“For me, it’s only a matter of time until that level of innovation is unlocked for different types of cryptocurrencies,” Krug said. “Probably consumer applications, but then increasingly for the enterprise space.”
That will likely generate new demand for cryptocurrencies.
“The more decentralized applications we see, the more this ecosystem will have an intrinsic value, which will be intrinsically linked to the value of the cryptocurrencies that will be used to pay for transactions and the work that’s happening in that ecosystem,” Krug said. “I think that will ultimately underpin the value that cryptocurrencies have.”
Cryptocurrencies also could make payment and business simpler.
“There are a lot of benefits that could come from using stable coins in B2B transactions, because you could get rid of currency volatility, and you could start using one stable coin across the entire business spectrum of your suppliers across the globe,” Krug said. “That comes with a lot of simplification, a lot of benefits on the business side and on the financial side for customers.”
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