Of course, something that would make approaching cryptocurrency easier for financial advisors is more regulation — and experts are expecting we’ll see that, too.
Financial regulators will issue a batch of new regulations and enforcement actions, which will cause frustration but should eventually drive crypto further into the mainstream, says Patrick Haggerty, director at Klaros Group, a financial services advisory and investment firm.
Securities regulation has always been a huge question mark in the crypto space, since it’s not even clear if crypto should be treated as a commodity, a security or something completely different. Whether or not we’ll get clarity there is still up in the air, but the SEC has an aggressive stance and they’ll likely develop clarity through enforcement rather than issuing a clear roadmap for people, Haggerty says.
DeFi — or decentralized finance, which refers to a variety of financial products that can be accessed directly via a blockchain network versus traditional intermediaries like banks — is a whole other ball game. In many ways, DeFi reflects traditional financial systems, but does so without the regulation that traditional finance systems have to face.
One aspect of regulation here could be stablecoins, coins that have their values tied to an outside asset like gold, which many DeFi applications are based on. Regulators may determine what a stablecoin issuer needs to do to call itself a stablecoin, Haggerty says.