Secondary Digital Asset Exchange Vs Digital Currency
The digital asset industry grew in size by more than a factor of two in the past few years, and the market is still growing. For instance, last November, the market capitalization of cryptocurrencies was over $3 trillion, up from $1.7 billion a year ago. Digital assets aren’t without their quirks. In particular, the market for stablecoins crashed in May, wiping out over $600 billion of investor funds. Moreover, digital currencies are being used as a means of evading taxation, with many tax owed not being reported. Additionally, a raft of rogue regimes have been funded by this money. Clearly, more work is needed to ensure that the digital economy works for everyone, not just the tech rich.
One of the more exciting aspects of the secondary digital asset exchange space is its potential to transform the financial services industry. As the financial landscape evolves, it will become increasingly important to offer consumers and businesses reliable, secure, and affordable financial services. A major benefit of digital assets is their direct, or near-direct, relationship with investors.
This will be facilitated by the use of open source blockchain networks. There are currently 270 digital currency exchanges around the world. These companies are attempting to capitalize on the nascent market by providing a platform for trading and servicing alternative assets. Some use a hybrid model, where one side provides a marketplace for trading digital assets and the other side is a repository for such assets.
A comprehensive regulatory regime for digital assets is long overdue, and while there are many winners and losers, the competition is likely to be intense. While it’s impossible to know for sure, it’s likely that the market will continue to grow. With the advent of new technologies like the Internet of Things, the need for new forms of digital currency will only increase.
Likewise, the advent of e-commerce and mobile payments has the potential to spur new business models and increase efficiency. Ultimately, the digital currency sector is set to become a key component of the United States’ global economic competitiveness. To that end, the federal government will need to keep a watchful eye on this nascent sector. However, given the recent record breaking performance of digital currencies, more attention should be focused on the risks and rewards associated with using these assets.
As with any industry, digital assets have their detractors, and more work is needed to ensure that the digital currency space serves as a force for good rather than a source of financial distress. Fortunately, the upcoming FedNow will make a big splash in this space by advancing nationwide infrastructure for instant payments and complementary Real Time Payments. Also, the Federal Reserve plans to launch an interbank clearing system in the not too distant future. Regardless of which digital currency gets crowned the king of the cryptosphere, a sound regulatory framework is imperative to safeguard the consumer and the economy at large.