US-based banking giant, Morgan Stanley, recently released their 2018 cryptocurrency industry report, which analyzed important trends within the blockchain and cryptocurrency industry and bullishly claimed that Bitcoin and altcoins have developed into a “new institutional investment class” over the past year.
The report looked at multiple facets of the cryptocurrency industry and claimed that the markets underwent an important transition between 2017 and 2018 that made cryptos a much more favorable investment class for institutions, mainly due to decreasing volatility and increased public awareness surrounding the markets.
Importantly, the report noted that traditional financial markets are likely to begin turning to cryptocurrencies and distributed ledger technology (DLT) in order to facilitate transactions that rely less on the traditional banking system.
“Over the coming years, we think that the market focus could turn increasingly toward cross trades between cryptocurrencies/tokens, which would transact via distributed ledgers only and not via the banking system,” the report explained.
The report also listed several persisting problems in the cryptocurrency industry, including the lack of regulatory compliance and the lack of fiat to crypto trading access on many exchanges, which leads to an increased use of stable coins.
The issue of regulatory compliance among the industry’s exchanges is relieved by the launch of licensed cryptocurrency exchanges that increase the validity of the industry by reducing fraud and by ensuring that institutional investors feel comfortable with the nascent markets.
Covesting is one such cryptocurrency exchange that is being developed in order to meet the needs of the rapidly growing industry. Covesting just recently received their DLT License from regulatory authorities in Gibraltar in parallel with the project’s first birthday, becoming one of the first companies in the world to receive such licensing.
The exchange’s CEO, Dmitrij Pruglo, spoke about the importance of operating under full regulatory compliance, saying:
“Regulations in the cryptocurrency space is a very natural development and it’s definitely a positive step forward for the whole industry. We need standards, we need regulatory oversight and we need strict requirements for services providers in order to expand and continue adoption. The same way as we have standards and regulatory oversight for every other business area whether it is medical services, construction business or banking sector. ”
Another prominent issue within the cryptocurrency industry that is emphasized in the Morgan Stanley report is the widespread use of stablecoins in lieu of fiat currencies. The researchers explained that the introduction of stable coins have detracted from the crypto markets, as they siphoned funding away from Bitcoin (and other cryptos) and encouraged high-frequency trading.
Because many cryptocurrency exchanges lack proper licensing, they are not able to offer a direct fiat gateway to prospective institutions. In the case of Covesting, however, their regulatory compliance is allowing them to engage in banking relationships and to offer these clients a direct fiat gateway with multiple currencies.
This feature will prove to be advantageous to both individual investors and institutions, as there will be no friction with regards to depositing and withdrawing funds.
The Covesting team is currently in the process of fine-tuning their platform and is preparing for their soft launch which is expected to occur in the coming days. The ongoing evolution of the cryptocurrency markets highlights the integral role that compliant cryptocurrency exchanges will eventually play in the world’s future financial system.