The financial industry is going through a sea change. So many aspects of it are under scrutiny: from debates over cashless societies, to universal basic income, and the implications of digital currencies. Money has always been a hot topic, but it has become even hotter.
Blockchain changed the conversation
The advent of blockchain technology is in part a reason for this sudden increase in interest. As Lauren deLisa Coleman writes for Forbes, we are seeing financial giants like JP Morgan enter the digital currency space, alongside Facebook and IBM. And she points out, “But amidst such vast activity around digital currency overall, there is a specific and growing interest toward trend shifts pertaining particularly to token exchanges.”
Talking about Token Exchanges
Coleman reports on the discussions at a New York event: Token Exchanges: The promise of liquidity, compliance and stability, where lawyers comprised the majority of the audience. Joel Telpner, partner and Chair Fintech & Blockchain Practice at Sullivan & Worcester LLP, addressed the issue of turbulence in the digital currency space: “We’re all collectively paying the price at the moment, but it’s important to keep in mind that this is not a bad thing. Most all new forms of technology have experienced a high level of unreasonable exuberance in the early days and after that period, business becomes much more stable.”
A more mature environment
Interestingly, he also suggested that now is the time to create a new ecosystem with new players: “”We’re at the end of the beginning,” he remarked. “This is about moving from the wild, wild, west to a more mature level of the digital currency space and tokens. Those that remain have to work hard and understand that success will come from fundamental principles in business and governance, and it will certainly pay off.”
3 key things to watch out for
He then identified what he believed are the three key regulatory areas to watch this year that could be game changers:
1. He believes the US Securities and Exchange Commission (SEC) will make a statement about the status of digital currencies and tokens — which are tokens and which are not.
2. The CFTC (Commodity Future Trading Commission) will become more involved in the token space given that this collective regulates commodities.
3. Stablecoins will come under a regulatory spotlight and decisions will be made about how to regulate this particular type of digital currency.
The event also revealed that a consensus of opinion indicates the issue of custodianship will come under focus this year as well. In addition, there will also be an eye to how trade is conducted in this space and how securities are managed securities once they are issued.
But, one of the most hotly debated topics in the industry is which jurisdiction will establish itself as a leader in the space: Telpner’s response to this was: “”But this approach was wrong in 2017, 2018 and still wrong to think like this in 2019, because all countries are working hard to regulate this space. Stop chasing jurisdiction.”