After a decade-long battle, the US SEC (Securities and Exchange Commission) finally gave several reputable participants the green light to operate 11 spot Bitcoin ETFs in January 2024. Among the approved participants are some of the biggest asset managers in the world, namely BlackRock and Fidelity.
With the approval comes a safer and easier way for US investors to get their hands on Bitcoin directly via highly regulated products instead of using unreliable crypto exchanges as it was in the past. And as expected, this approval got the global cryptocurrency market going abuzz, to the point that Bitcoin prices hit a record high of $73,800 on March 14, 2024.
While US investors are eager to add Bitcoin to their investment portfolio, their UK counterparts can’t help but wonder whether they are falling behind in this dynamic investment landscape. After all, not only can they not access the spot Bitcoin ETFs, but the Financial Conduct Authority (FCA) banned retail customers from buying/investing in cryptocurrency derivative products, stating they have no reliable basis for valuation.
The UK is in the Slow Lane
Many experts in the UK crypto space believe that the financial watchdog, the FCA, has failed to provide its investors with a safe and reliable route to bitcoin and other crypto investments. The current situation is that retail investors can still access these assets, but only via offshore and less-regulated cryptocurrency exchanges. Does the collapse of FTX, a well-known cryptocurrency exchange owned by Sam Bankman-Fried, ring a bell?
Fortunately, professional investors saw a light at the end of the tunnel in early March 2024. That’s after the FCA ceded some ground by approving the creation of crypto-linked ETFs to list on the London Stock Exchange. That way, approved credit institutions and investment firms can issue notes not only backed by Bitcoin but also by Ethereum, the second most popular digital asset in the industry.
Although only professional investors can operate these notes, it’s a sign in the right direction that the UK will eventually lower its barriers to cryptocurrency investments. The move also went further to unveil several proposed legislations to regulate the crypto market, including embracing stablecoins as a payment option for the public.
But that’s not to say that the wrestling match between the Westminster politicians and the London market watchdogs is over. As a matter of fact, the FCA recently reiterated its stance on how crypto derivatives and cETNs (Cryptoasset Exchange Traded Notes) are not suitable for retail investors.
In addition, it banned crypto companies from marketing to the British public. Otherwise, they would attract unlimited fines and up to a two-year jail term. That’s what led Binance, one of the world’s largest crypto exchanges, to pull from the UK market.
Benefits of Having More Access to Digital Assets
Despite the enthusiasm in the UK crypto market after the approval of the creation of cETNs for professional investors, we cannot help but wonder what more access to these digital assets for UK investors could look like. Some of the benefits include:
Protection Against Inflation
Most cryptocurrencies have a hard cap on the amount of minted coins there will ever be. That means as these tokens become more in demand, the prices go higher since there is no increase in supply.
Unlike traditional currencies, where demand usually overtakes supply, crypto value keeps up with market demand, as it has so far prevented inflation in its 15-year long run.
Speedy and Cost-effective Transactions
Crypto’s underlying technology, blockchain, allows lightning-fast transactions on its network. That way, users can complete transactions within minutes, compared to the 24-hour limit for wire transfers and 3-5 business days for bank transfers. Even better, these transactions attract little to no transaction costs.
A practical example of this is when players use these digital assets to access games on their favourite gambling sites. Not only can they deposit and withdraw their winnings within 15 minutes, in most cases, but some operators also offer exclusive Online Casino Bonuses for those who use crypto payment options, which is a win-win situation.
Transparency and Safety
As long as your digital assets are in your crypto wallet, no one can access them unless they have your private key. What’s more, all crypto transactions on the blockchain are recorded and verified from other unrelated computer systems.
That way, users are assured of secured transactions via the use of private and public keys as well as proof of work or proof of stake mechanisms, among other incentive systems. Given the decentralised nature of cryptocurrencies, investors can be sure of open and manipulation-free transactions.
Disadvantages of More Access to Cryptocurrencies
Yes, the benefits of more crypto access are profitable and appealing. But of course, several downsides come with it. These include:
Pseudonymous transactions: Although we have heard the claims that cryptocurrencies are anonymous, they are actually pseudonymous, meaning they always leave a digital trail, allowing experts and governments to decode them.
There’s always a risk of attack, at least on the miner’s side. When they gain 50% control over a network’s mining hash rate, a bad actor can reverse completed transactions, pass transactions in progress, spend tokens twice, and more. However, this risk is exclusive to new blockchain networks and hard-forked systems.
The lack of regulation puts off many investors from the cryptocurrency market. With crypto fraud reaching new heights, more governments are warning their citizens against investing in digital assets without adequate knowledge and skill.
The Crypto Dominance is Just Starting
Over the course of the past few years, we have seen many global governments adopt crypto. From the EU approval of crypto legislation to Hong Kong’s launch of two crypto futures ETFs to the launch of Ether and Bitcoin ETFs on the Cboe Australia Exchange, it’s safe to say that the crypto hype is just at its beginning stages.
So, even though the UK government is taking a calculated approach to this dynamic landscape, we can’t wait to see what the next five to ten years will do to this sector.