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Institutional Crypto Investors Flag Regulation a ‘Risk and Reward’ for Bitcoin

Last Updated March 4, 2021 2:38 PM
Benjamin Vitáris
Last Updated March 4, 2021 2:38 PM

Binance has published a report today, in which the crypto exchange revealed the market insights of its largest institutional and VIP clients. As a result, the participants of the research believe regulation is both a big risk and a key growth driver for the crypto industry.

Regulation and ETFs > Libra and JPM Coin

binance research top growth drivers crypto institutionals

In its Q2 2019 report named “Institutional Market Insights” , Binance has asked its 41 institutional and VIP client participants on what they believe are the top factors that could potentially contribute to the rise of the crypto industry.

The institutional investors ranked regulations – both global and local – as the top potential growth driver for cryptocurrencies, followed by Bitcoin ETFs and traditional brokerages like Fidelity and E*Trade offering crypto services.

“In general, any development of auxiliary financial products (ETFs, options, regulated futures and brokerage services) could become significant growth drivers for the industry,” Binance concludes.

Surprisingly, crypto initiatives from private companies like JPMorgan and Samsung are at the end of the list of potential growth drivers. Institutional investors even classified Facebook’s upcoming Libra cryptocurrency – that has been a highly trending topic in the past few months – as a low growth driver for the crypto industry.

Institutional investors fear hacker attacks

binance research top risks crypto institutional investors

When they were asked about the largest risks for the crypto industry, institutionals have ranked technology failures – such as hacker attacks targeting cryptocurrency-related services – as well as local and global regulatory changes as the top negative factors.

While Tether – the stablecoin issuer that is currently in legal trouble with the New York Attorney General  – is ranked as the third-largest risk for the cryptocurrency industry, Binance finds it surprising that the exchange’s institutional research participants haven’t considered Tether a higher place on the list.

It’s also interesting to mention that institutionals included regulations in the top two factors for both growth drivers and risks for the crypto industry.

Good crypto regulation can increase growth

According to Binance, the reason for this is that regulation can either boost the growth of the crypto industry by providing a viable framework for digital currency projects, or it could also slow down the development of the space.

“Regulation can either assist and foster growth by providing a framework within which crypto projects can work and flourish, or it could stymie growth and development, thus demonstrating the potential large upsides and downsides that regulation has on this space, depending on how it evolves,” the researchers stated.

Binance is absolutely right here. The most important factor to consider when talking about crypto regulations is the way lawmakers create the framework for digital currency projects.

Some jurisdictions – such as Switzerland, Malta, and Japan – have created a viable framework that replaces the fog crypto projects often face, resulting in a growing number of digital currency-related solutions as well as a growing industry.

On the other hand, regulations can also slow down or even halt the growth of the cryptocurrency industry. Take China as an example. The Asian country introduced a blanket ban on all Initial Coin Offerings (ICOs) in September 2017.

While China has taken a few minor steps towards crypto, the country’s 2017 ICO ban has evoked a huge price crash  and resulted in other negative consequences for the space.

With regulators all over the world under pressure to create or update their crypto frameworks ahead of the launch of Libra , it will be exciting to see whether future regulations will boost or decelerate the growth of the digital currency industry.