# Why so critical?: Making crypto credible Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2018-06-02 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: How Can the Crypto Industry Gain Trust in Financial Markets? Meta Description: Discover how the cryptocurrency industry is working to establish trustworthiness and credibility within the wider financial sector, through regulatory measures URL: https://financedigest.com/why-so-critical-making-crypto-crediblehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd020618-3-1-1736842671486-compressed.jpg) By **Erik Wilgenhof Plante**, CCO at [Sequant Capital](http://www.sequantcapital.com/) Cryptocurrency, whether it is Bitcoin, Ethereum, Ripple or the others on the market, still faces scepticism from the wider financial industry. Even with Bitcoin in its ninth year, industry leaders such as Mark Mobius continue to lambast the market. With the entire crypto industry valued in the region of hundreds of billions, what can the industry do to make to make cryptocurrency a more trustworthy and asset? **Understanding the lack of trust** Firstly, it is [important to understand why the industry](https://www.financedigest.com/plaque-disclosing-aids-market-important-changes-in-industry-dynamics-during-2022-2028.html "Plaque Disclosing Aids Market Important Changes in Industry Dynamics during 2022-2028") is viewed so critically. This lack of trust has been mainly down to how cryptocurrency is [perceived within the financial market](https://www.financedigest.com/diamond-like-carbon-market-to-perceive-substantial-growth-during-2016-2024.html "Diamond Like Carbon Market to Perceive Substantial Growth During 2016-2024"). With Bitcoin gaining popularity from [retail investors](https://www.financedigest.com/analysis-european-retailers-are-on-investors-naughty-lists-this-christmas.html "Analysis-European retailers are on investors’ naughty lists this Christmas") and being used to pay for products ranging from pizza to narcotics, there is an understandable scepticism towards the purpose of the currency. For many, the asset has been viewed as a short-lived gimmick or a method of conducting illegal transactions without being caught. However, much has changed over the years. Cryptocurrency is no longer just for consumers; serious [investors have become more heavily involved in the benefits of working with this asset](https://www.financedigest.com/4-ways-todays-investor-can-future-proof-their-assets.html "4 Ways Today’s Investor Can Future Proof their Assets"). As a result, the crypto-landscape has changed. In many ways, crypto – especially in Europe – is no longer viewed as a simple currency. Instead, it is a tradable asset that can be included with more traditional products such as property or gold. Most [crypto currencies have a limited](https://www.financedigest.com/natwest-limits-customers-crypto-transfers-citing-scam-concerns.html "NatWest limits customers’ crypto transfers, citing scam concerns") supply, capped at a certain amount which by definition will drive the value up. This makes them a very interesting asset class for a large group of investors. As such, cryptocurrency like Bitcoin now forms a part of a wider portfolio for hedge funds and high [net worth](https://www.financedigest.com/air-separation-plant-market-projected-to-expand-at-a-cagr-of-5-to-attain-a-net-worth-of-us-7-9-bn-by-the-end-of-2028-fmi.html "Air Separation Plant Market projected to expand at a CAGR of 5% to attain a net worth of US$ 7.9 Bn by the end of 2028: FMI") individuals. As the industry develops, this trend is only set to continue, [moving even further away](https://www.financedigest.com/exclusive-eu-to-move-away-from-emergency-phase-of-covid-pandemic-document.html "Exclusive-EU to move away from emergency phase of COVID pandemic – document") from traditional payments. **Getting regulated** With more professionals investing in cryptocurrency, the crypto industry is doing all it can to ensure its reliability and trustworthiness– whether it is setting up [governing bodies or providing a set of guidelines for businesses](https://www.financedigest.com/government-assisted-financing-schemes-for-small-businesses.html "Government Assisted Financing Schemes For Small Businesses"). However, this self-regulating culture can only go so far. In order to be viewed more positively by the wider financial [industry](https://www.financedigest.com/how-to-drive-a-data-culture-in-the-finance-industry.html "How to drive a data culture in the finance industry"), there needs to be more robust governance. This is where institutionalised investment is needed. The criticisms that industry leaders have raised can only be allayed with tighter controls that [protect investments](https://www.financedigest.com/a-gold-ira-can-protect-your-retirement-investment.html "A Gold IRA Can Protect Your Retirement Investment") and ensure illegal activity does not take place. Having crypto currency related activity monitored by regulatory bodies such as the FCA will provide much-needed reassurance the financial [sector](https://www.financedigest.com/is-automation-key-to-esg-success-in-the-banking-and-finance-sector.html "Is automation key to ESG success in the banking and finance sector?"). With this approach, cryptocurrency will be viewed as just another part of the financial [services sector](https://www.financedigest.com/the-state-of-cybersecurity-in-todays-financial-services-sector.html "The state of cybersecurity in today’s financial services sector"), making it more credible in the process, both as an investment and a payment alternative. Many [regulators are already in the process of creating new frameworks specifically catering to the crypto](https://www.financedigest.com/global-crypto-regulation-body-likely-in-next-year-top-official-says.html "Global crypto regulation body likely in next year, top official says") industry. For example, the ADGM financial regulator in Abu Dhabi has proposed a framework that will bring [crypto exchanges](https://www.financedigest.com/analysis-crypto-exchanges-wont-bar-russians-raising-fears-of-sanctions-backdoor.html "Analysis-Crypto exchanges won’t bar Russians, raising fears of sanctions backdoor") and brokers under its remit. Equally, the Financial Services Agency (FSA) in Japan has begun registering [crypto companies](https://www.financedigest.com/why-are-companies-implementing-crypto-payments.html "Why are companies implementing crypto payments?"), while the New York State Department of Financial Services(DFS) was the first to possess a Bit license. Regulation achieves more than just making crypto assets more credible however; with a proper and pragmatic framework the entire [industry will benefit](https://www.financedigest.com/industries-with-the-most-workplace-accidents-and-workers-comp-benefits.html "Industries with the Most Workplace Accidents and Workers Comp Benefits"). In its current state, it can be easy for investors to worry about whether they are working with a reliable partner, especially considering the numerous exchanges, brokers and currencies in existence. With proper regulation, crypto-services will have to [meet security and safety standards](https://www.financedigest.com/esg-innovation-allowing-everyone-to-meet-the-standard.html "ESG innovation: Allowing everyone to meet the standard") as well. The knock-on effect will ensure that [investors will be able to trust](https://www.financedigest.com/markets-slammed-with-noise-investors-trust-tone-to-set-the-record-straight.html "Markets Slammed With Noise, Investors Trust Tone to Set the Record Straight") the people they work with which will improve the image of the entire industry. **What can be done now?** Until this wider change happens, the cryptocurrency [sector should be doing all it can to improve](https://www.financedigest.com/effective-integration-will-improve-mobility-in-the-tl-sector-over-the-next-five-years.html "Effective Integration Will Improve Mobility in the T&L Sector Over the Next Five Years") its image. This goes beyond simply [setting up governing](https://www.financedigest.com/lights-off-heat-down-central-europe-governments-save-power-to-set-example.html "Lights off, heat down: central Europe governments save power to set example") bodies and policing each other. Instead, those in the sector should be looking to comply with existing financial [regulations that already apply to the wider market](https://www.financedigest.com/u-s-markets-regulator-takes-aim-at-coinbase-lending-product.html "U.S. markets regulator takes aim at Coinbase lending product"). Proper regulation does not just mean Know Your Customer (KYC) and [Anti-Money Laundering](https://www.financedigest.com/anti-money-laundering-time-to-take-a-new-approach.html "ANTI-MONEY LAUNDERING: TIME TO TAKE A NEW APPROACH?") (AML) checks, however. These processes are already common in most financial companies and are an industry standard for anyone wishing to professionally invest in cryptocurrency. Instead, if firms truly want to change financial [leaders’](https://www.financedigest.com/now-is-the-time-for-finance-leaders-to-take-on-a-more-strategic-and-valuable-role.html "Now is the time for finance leaders to take on a more strategic and valuable role") views of cryptocurrency, they will need to go further. Pursuing [compliance with multiple regulations](https://www.financedigest.com/are-compliance-and-anti-money-laundering-aml-regulations-hurting-your-sales.html "Are compliance and anti-money laundering (AML) regulations hurting your sales?") may seem difficult, but despite popular belief, cryptocurrency is not that different from other assets. MiFID II, for example, can set a good benchmark. If a company can comply with this regulation and approach its crypto assets in the same manner, it will be much better prepared for when a more crypto-specific structure comes into place. Demonstrating compliance with industry regulations will also present a more responsible image to the wider financial industry. Self-governance combined with recognisable standards – whether it is [rules set](https://www.financedigest.com/japans-ruling-party-is-set-for-likely-bruising-in-weekend-election.html "Japan’s ruling party is set for likely bruising in weekend election") out by the FCA, or specific legislation like GDPR or MiFID II – will increase awareness of cryptocurrency’s credibility. Fundamentally, industry leaders will see that the asset is under the same restrictions and controls as the rest of the financial sector. Even with the scepticism from industry leaders, cryptocurrency can do a lot in order to be viewed as a reliable asset for investment. Complying with current regulation, whilst also building a self-governing sector, will go a long way in improving the image of the industry and [encourage those in the financial services sector](https://www.financedigest.com/the-importance-of-role-models-and-policy-in-encouraging-more-women-to-pursue-careers-in-the-finance-sector.html "The importance of role models and policy in encouraging more women to pursue careers in the finance sector") – both large and small– to get involved. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---