Regulations Are Halting The Growth And Development Of Cryptocurrency Businesses Within The US, Which Will Likely Have A Negative Effect On The Speed Of Cryptocurrency Adoption.

Adoption of cryptocurrencies and blockchain technology will happen regardless of regulation, but extensive regulations could have a very negative impact on the establishment of cryptocurrency services or businesses.

One of the biggest issues that cryptocurrencies have faced since the very beginning is the relative lack of liquidity within the market, which I believe is largely due to the current regulations. In order for a business to engage in trading, transferring, or selling cryptocurrencies, the company would be required to obtain a Money Service Business license from the federal government, in addition to the regulation in their state of operation. States like New York have been very effective at driving all cryptocurrency business and the revenue that comes along with it out of the state, and has taken the harshest stance against 'virtual currencies' of all states. In order to obtain an MSB, an individual must send $5000 as an application fee, as well as statements proving they hold over a half million in assets, and a one million dollar bond if they are accepted. These requirements are simply for a federal license, and businesses would also have to look into the regulations of every state in which they want to do business. 

Big exchanges and companies such as Coinbase and Poloniex have the capital and support required to obtain all of the necessary licenses, but smaller 'start-ups' face a long and expensive road ahead of them. While the regulation on a federal level regarding cryptocurrencies is still very unclear, any business who wished to conduct high volume transactions must be complaint with federal and state financial business regulations. This means that companies or individuals who wish to enter into the cryptocurrency market will require an abundance of capital and time, which makes the process as a whole relatively risky to prospective investors. Even after going through all of the required steps, it's still common for an application to be denied, and the application fee as well as the extensive lawyer fees can never be recouped by the company. The best way to promote and enhance advancement and development is allowing for a competitive market within the space, but the US government seems to be taking the opposite stance. 

Regulations surrounding cryptocurrency are a major factor in the lack of liquidity in  the cryptocurrency market. 

While the cryptocurrency market has more liquidity than it ever has before, many investors and users find it very difficult to buy 'small' amounts of coins. Due to the fact that major US sellers on localbitcoins who conduct single transactions over $3,000 require a federal MSB license, the ability to start a bitcoin 'exchange' business is limited to only individuals with a high net worth and the connections. There is still a grey area surround the legality of selling bitcoins for cash within the US, and it depends on state guidelines as well. While many cities have seen Bitcoin ATMs begin to pop up, many of these ATMs charge double digit percentages for the purchase of Bitcoin. I use my local Bitcoin ATM a few times a month, but only to sell my coins. The ATM charges an 11% fee for the purchase of bitcoins and offers 1% under spot for those selling bitcoin. While this is a great service for those individuals wishing to get fiat, those trying to buy bitcoin will find that it is not a practical method by any means. 

The reason that this ATM is able to charge such high fees is because there are very limited options for individuals looking to buy Bitcoin with cash instantly, and is only a few percentage points higher than the local bitcoin cash prices around my city. The specific ATM I use has over 10 locations in 5 states, and is able to use the same license for all of the ATMs. This lowers the cost of licensing drastically for each location, and they are able to establish an ATM much easier than a new company would be able to. The company must have spent and pledged an amount over 1 million dollars to hold an d receive their license, which is simply not possible for most individuals wishing to establish a company. There are still many sellers on localbitcoins that operate without a license and potentially in a legal grey area, but it's starting to look like that is becoming much more risky. 

Cryptocurrency will be adopted regardless of regulation, but regulation could potentially slow development and adoption. 

Blockchain technology has finally been recognized by many individuals for the potential advantages that it provides, but strict regulation could significantly impact the adoption and development of decentralized implementations of blockchain technology. Everything from further restriction of investing in cryptocurrencies, to adding extra identification requirements could have a huge impact on many individuals desire to use cryptocurrencies and blockchain technology. The cryptocurrency market will continue to grow regardless of the regulations that any specific country attempts to propose, but these regulators would be doing their citizens an extreme disservice.

 Investment out of Asia is higher than it has ever been, and with the recent regulation in Japan which not only legalized cryptocurrencies, but also eliminated tax associated with them, the interest and investment from Japan will only continue to grow. This type of regulation holds firms accountable for the protection and safety of their users funds, but allows for a much greater level of competition. In order for fees associated with buying Bitcoin to decrease, there has to be a greater level of competition in the market. For 'small' investors they are left with limited options and Coinbase usually turn out to have the lowest fees for transactions under $800, but they have to wait 4-5 days before they actually receive their coins, and pay a 1.5% fee. If there were more options for individuals to buy and sell small amounts of cryptocurrency, then we would likely see more price competition and lower prices for the users. 

Dangerous legislation could come out of countries other than the United States as well, but the US has a track record that suggests they may act in their own interests regarding cryptocurrency legislation. In the past the US was mainly concerned with receiving the taxes off of the gains made from Bitcoin, but many states are beginning to take a strong opposition to cryptocurrencies. States such as California are considering implementing legislation similar to the Bitlicense within New York, which would undoubtedly drive many cryptocurrency businesses out of the state. States such as New Hampshire are taking the opposite approach, and added legislation that protects Bitcoin and other cryptocurrencies from money transmitter laws. This gives businesses the ability to have piece of mind that they can freely buy and sell cryptocurrencies within the state and stay in accordance with all of the state laws, and I believe we will see many cryptocurrency  businesses established in New Hampshire over the next few years. Cryptocurrency will rise to adoption regardless of regulation, but reasonable regulation would likely enhance the speed of adoption. 

I hope that you enjoyed this post, and as always I urge you to leave any comments, questions, input, ect. in the comments below! Thanks for the support and for reading!

image sources:1-2-3