Bitcoin and the wider cryptocurrency industry have struggled over the last year as sky-high expectations for the sector after 2017’s massive bull run have either stalled or been delayed.
The bitcoin price has meanwhile stagnated after a bitcoin cash civil war-inspired sell-off resulted in many cryptocurrency holders opting to recoup their losses than hold on for the next bull run—if it ever comes.
However, bitcoin and cryptocurrency developments have continued to rumble on and Marcus Hughes, U.K. lead counsel for San Francisco-based crypto exchange and wallet provider Coinbase, expects this year to mean big changes for bitcoin regulation around the world
Bitcoin has failed to live up to the impossibly high expectations the 2017 bull run set—but once regulation catches up, it might get there. Getty
“Within the next year or two, we’ll see big developments,” Hughes said in an interview. “Regulation will take shape this year, particularly in Europe.”
In the U.K. the country’s Financial Conduct Authority (FCA), which oversees its huge banking industry, is carrying out a consultation that could see it ban the sale of derivatives based on cryptocurrencies such as bitcoin to consumers and last month the U.K. government said it stands ready to empower the FCA to oversee all cryptocurrency assets.
The FCA is also investigating some 18 companies over cryptocurrency use, it was revealed by a freedom of information request by the Telegraph newspaper.
Nicky Morgan, who chairs the influential Treasury select committee group of British lawmakers, said: “It is clear that the government and the FCA share the committee’s concerns on crypto-assets, including the lack of regulation, minimal consumer protection and anonymity aiding money laundering … The committee will keep a close eye on these consultations and will continue to press for regulation.”
Meanwhile, the European Banking Authority (EBA) is calling for standardized regulations for cryptocurrency operations within the E.U. in an attempt to eliminate unfair regulatory arbitrage while protecting bitcoin and cryptocurrency investors across the bloc.
“We could end up with E.U. member states creating their own crypto laws, but it’s certainly possible we’ll get a unified approach in Europe,” said Huges. “It would make life for companies like Coinbase a lot easier.”
Hughes, who joined investment bank Morgan Stanley just ahead of the global financial crisis in June 2009, stepped into the cryptocurrency sector in the midst of a bear market that’s been labeled crypto winter for its debilitating effects on the industry.
“The view amongst the likes of Morgan Stanley executives is that bitcoin and cryptocurrency does now have staying power. They don’t expect it to go away any time soon.”
The bitcoin price has fallen by some 80% over the last year after an epic bull run throughout 2017 that saw the price skyrocket to almost $20,000 per bitcoin in December 2017.
“Coinbase takes the long view on the bitcoin and wider cryptocurrency price,” said Hughes said, though he admits he checks the bitcoin price regularly. “We need to move beyond the speculation phase of bitcoin and cryptocurrency to the utility phase. The utility phase will mean bitcoin and crypto becomes more widely accepted and understood.”
The bitcoin price has fallen steadily since the end of 2017, casting doubt over institutional interest in the sector.CoinDesk
But despite the fall in the bitcoin price, Hughes thinks some of the biggest global banks are still keen to get into bitcoin and cryptocurrencies, with a lack of consistent and established regulation holding them back.
“A number have dipped their toes but it is a slow burn process,” Hughes said. “Regulation will help a lot, in particular around custody offerings. These things take time. Clients of investment banks will expect regulation to be in place.
“The closer we get to an environment where there’s a degree of comfort that operators are meeting minimum standards. Coinbase is working with governments and regulators to help shape that regulation.
“I would be surprised if other traditional financial services executives didn’t make the move across to the bitcoin and cryptocurrency world,” Hughes added. “As the industry matures and is better regulated it will need the talent and experience to manage it.”