The year 2020 will have delivered major conclusions regarding the state of the current financial system and that of the cryptocurrency market. While the former suffered from the effects of the Covid-19 pandemic, the latter gradually gained importance in the eyes of the public. Presented as a solution against inflation, Bitcoin (BTC) will thus have won the confidence of institutional investors. A clash naturally arose between the financial system and cryptocurrencies. Bitcoin has since crossed several bars above its old record value, so it has taken an ascendancy in this battle. Now it remains to be seen which side to stay on.
Government economic stimulus policies have benefited Bitcoin
To counter the effects of the crisis, central banks poured enormous liquidity into the financial market as a backstop. This policy naturally raised the price of assets on the markets. including that of cryptocurrencies. But long before that, the cryptocurrency market was at its lowest with a massive liquidation of assets. A situation that makes say Frances coppola -Finance specialist and columnist at CoinDesk, than ” the fate of cryptocurrencies in 2020 was mainly determined by central banks “.
Ultimately Bitcoin, ether, and some stablecoins eventually became safe assets for lending the DeFi space which also had excellent performance. As institutions have turned to the cryptocurrency market to protect their assets, they attracted into the movement of ordinary investors. Cryptocurrencies that are increasingly easier to trade and hold have also enabled institutional investors to obtain them massively given the funds they have. If cryptocurrencies seem to be in good shape unlike trusts and secondarily to traditional banks, they do have an advantage.
Towards the elimination of regulatory inequalities in terms of knowing your customer
Cryptocurrencies indeed enjoy the anonymity of transfers from exchanges to private portfolios unlike banks. These spend fortunes to comply with know your customer / anti-money laundering (KYC / AML) requirements. It is also announced that the Network Against Financial Crimes (FinCEN) would now impose this law on the crypto space.
While this move can make cryptocurrencies more attractive to large institutional investors, it would put the industry in a dilemma, says Coppola. “If the crypto space chooses to comply, cryptocurrency could be widely adopted – but at the cost of being finally absorbed into the financial system it intends to replace. But if he chooses separation, the road will eventually lead to a head-on conflict with those whose job it is to enforce existing laws. Who will win? »She thus launched to introduce the debate.
It is difficult at this time to answer this question with confidence, especially since there is no indication of the posture each party will take. On the other hand, it is certain that the digital currencies of the central banks which will land in 2021 will necessarily influence this battle..