Volatility and fraud affecting long-term success of cryptocurrencies
Many view cryptocurrencies to be a worthwhile digital alternative to cash or credit cards, but its negative reputation and volatility may hinder its real growth in the crypto sector. The polarisation between criticism and praise for crypto-assets from world leaders and business figures has led many to agree on the fact that regulation is needed if cryptocurrencies are to find any future success as money.
After all, the anonymity – and lack of security standards and compliance – allows for more fraudulent and criminal activities within the crypto ecosystem. This stigma could likely keep cryptocurrencies far from mass market adoption, despite the fact that certain elements of crypto-assets could also help revolutionise how we consume, work and communicate, and point the way to the future of money. China has already banned cryptocurrencies. Without regulation, the industry may not sustain itself.
The future is regulation
“The time has come to hold the crypto-asset ecosystem to the same standards of the rest of the financial system,” the Bank of England (BEO) Governor, Mark Carney, stated in a recent speech at the inaugural Scottish Economics Conference. He believes that regulating elements of the crypto-asset ecosystem to combat illicit activities is the best path to the security of the financial system and market integrity. “Anarchy may reign on the dark web, but in the UK it’s just a song that your parents used to listen to,” he added.
The need for more stringent security solutions accompanies the growing demand for fast and seamless onboarding; success will come from a balance of both. In fact, the most highly ranked exchanges from our recent P.A.I.D. Strategies industry scorecard use combinations of email verification and password creation along with password hints, mobile two-factor authentication (2FA), and government-issued document capture and proof of address. “Both regulators and companies themselves are turning away from the anonymity that has often defined cryptocurrencies,” says Mitek’s EMEA Managing Director, René Hendriske. “With the demand for cryptocurrency skyrocketing, Mitek’s mission is to provide compliant customer onboarding that doesn’t come at the expense of the user experience.”
“Bringing crypto-assets onto a level regulatory playing field could also catalyse private innovation to create a more resilient, effective payments system,” Carney concluded in his speech. “With these foundations in place, the scene is set for better payments, a better economy and a better Friday night out.”
Our P.A.I.D. Strategies industry scorecard of leading exchanges explores:
- New approaches by wallets to align better with Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements
- The efficiency of each wallet’s onboarding process
- Identity verification requirements
- Additional security measures
Read the P.A.ID Strategies report, “Cryptocurrency Identity Crisis” to see how 25 wallets and exchanges ranked for the onboarding and identity verification user experience
References
“The Future of Money.” Speech given by Mark Carney, Governor of the Bank of England. March 2018. Back of England. https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/the-future-of-money-speech-by-mark-carney.pdf