min read

Will Crypto Regulation Dent Your Portfolio?

Learn about how crypto regulations affect investors and how crypto can help you hedge against inflation.

Further Readings

No items found.

Our CEO, Raymond Hsu, spoke with Finimize in an online seminar earlier this week about crypto regulation and how it affects investors. 

If you’ve missed the event, don’t worry! We’ve put together an adapted transcript of the session, featuring a list of discussion points and key takeaways.

1: How can crypto be regulated and why should it be?

Raymond Hsu: Let’s start with the first part: How can crypto be regulated?

Governments can regulate the industry by having rules around crypto centralised exchanges.

In Europe, the European Banking Authority, the European Commission and the European Central Bank have all played an important role in developing and enforcing KYC (Know Your Customer) and AML (Anti-Money Laundering) policies across all exchanges operating within Europe’s. borders. The U.S. and other parts of the world have done the same. 

In fact, most major jurisdictions across the world are also regulating centralised crypto exchanges in the same fashion - they must be licensed, they must follow strict KYC and AML regulations plus more. 

Centralised cryptocurrency exchanges have no choice but to adhere to what governments demand, as most crypto users rely on these exchanges to utilise their digital assets. In addition, crypto exchanges that fail to follow the government’s regulations will be issued major fines and possibly forced to shut down. 

That is why Cabital’s compliance programme is modelled after leading global financial service providers. We believe that regulating the cryptocurrency industry is essential to its sustainable growth. We will continue to further strengthen the industry’s legitimacy by leading in compliance risk management and promoting a culture embedded in transparency and good business ethics. 

Regulators may not be able to eliminate the technology that powers bitcoin and other cryptocurrencies, but they can make it incredibly difficult for the majority of users, as they require fiat on-ramps to get from CeFi to DeFi—at least for now.

Governments can also target crypto users.

Contrary to popular opinion, Bitcoin is not anonymous. 

An argument can be made that Bitcoin and Etherium are even easier to track than fiat because they run on a public and transparent ledger, open for anybody with an internet connection to see.

Combined with cutting edge technologies and the willingness of cryptocurrency exchanges to work with governments, regulators could easily track funds sent and received from certain addresses and pinpoint the specific individual. 

In fact, companies such as Chainalysis and Elliptic have already created partnerships with law enforcement in many countries to track down illicit cryptocurrency users and discover the identity behind the transactions. Cabital has partnered with Chainalysis since our formation to empower us to meet applicable regulatory requirements on Anti-Money Laundering (AML) in each of our markets with ease and agility.

In sum, yes, Bitcoin and crypto can be regulated. And it has already been regulated by governments around the world with strict KYC and AML regulations. 

The second part of the question is: Should crypto be regulated?

Crypto should be regulated to increase investor protection, prevent money laundering and tax evasion, yet still allow the industry to grow, create new jobs and build out new and exciting technologies. 

Regulation can help eliminate the hidden risks that many investors do not consider. 

For example, if you put your savings into an interest-earning crypto platform, how sure can you be that your bitcoin is protected? What if the platform gets hacked or goes bankrupt? This is where regulation can help. And that is where Cabital can help too: we make it as easy as possible to buy and sell crypto with euros and pounds and to generate high-yield passive income. 

There is a fear that cryptocurrency is being used to finance terrorism or funnel money from illegal activities. As a result, governments are requiring centralised cryptocurrency exchanges to have clear and strict KYC and AML procedures in place. 

“In fact, I would say that the crypto industry will only be suitable for mainstream retail investors when there are clear regulations to protect their assets and information. 

When crypto companies have clear regulations, they can grow in line with regulators’ expectations and make it easier for people to invest in crypto. The problem is always when crypto firms don’t have any regulations—that can lead to them working in a grey area, never knowing when regulations will come and how they will change their business model.

Regulations also build confidence for institutional investors who have to follow strict risk management and compliance rules. 

Without clear guidelines, it's very difficult for cryptocurrency investors and users to be sure they are in safe waters, which is a large impediment to future growth. 

That is why at Cabital, we are delighted to see the U.S. and Europe developing a clear regulatory framework for us, so that we may serve our customers better. 

The European Commission has said that they hope to finalise its proposed regulatory sandbox for financial products based on distributed ledger technology by the end of the year. This is great news for us and crypto investors in Europe as we can move forward in a clear direction. 

2: How can regulation benefit everyday crypto investors? 

Raymond Hsu:

“Regulation will help the everyday crypto investor have peace of mind when they buy, sell and hold onto their digital assets.

Regulation will ensure that centralised exchanges give you exactly what you pay for. 

Regulation will also protect the entire economy and financial systems, especially as stable coins are becoming larger over time. 

Regulation will help alleviate fear in new investors who are still nervous about investing in this new and upcoming asset class.

But there is a fine line in regulation between making it safe and suffocating the industry. 

At Cabital, we are happy that governments are incorporating this new industry into their financial systems, but it needs to be light enough where we can still innovate and create new products and services for everyone. 

3: What does crypto regulation mean for the future of banking, and how can crypto be a great hedge against inflation?

Raymond Hsu: There are now more than 75 million users of Bitcoin, up from around three million seven years ago, and the number of digital currencies has exploded. Globally, 220 million people use cryptocurrencies, according to a July report by Crypto.com.

It seems to be clear that it is a matter of time—10 or 20 or years or it might be sooner—when effectively all assets are going to be in a digital format and now banks are racing to catch up.

This is a rocky path for banks, challenging them to restructure and adapt to the new digital era.  And in the meantime as investors, with banks, we only have the option of keeping the cash sitting with a 1% a year, which is clearly not optimal.

Amid unchecked inflation, cash and credit are becoming liabilities. Investing in cryptocurrencies such as Bitcoin and depositing them is a great and new way to hedge against inflation and even generate high-yield passive income.

“A new and effective way to hedge against the rising inflation of cash is through buying and depositing cryptocurrencies on digital wealth management and savings platforms.

A great platform to do this on is Cabital no hidden fees and you can earn high-yield passive income on your cryptocurrency, making bank deposits in Europe look completely unappealing. Since Cabital has added SEPA and FPS to its deposit options, the cryptocurrency savings platform allows customers to easily transfer their assets between euros and cryptocurrencies to generate high-yield passive income.

4: How does Cabital work and how is it safe for crypto investors?

Raymond Hsu: Cabital is a trusted digital financial institution to buy, sell and earn cryptocurrency. 

For users in the Eurozone, you can use euros to buy crypto. For users in Britain, you can use British pounds to buy crypto as well. 

You can sell your crypto any time or alternatively, you can have your crypto growing by subscribing to our competitive and high-yield fixed savings or flexible savings features. 

Cabital successfully achieves leading APY rates on cryptocurrency without a native token through highly strategic investments that are safe, secure and always compliant.

“Our customers can buy cryptocurrency with cash, earn passive income and cash out their earnings with a few simple clicks on Cabital. 

This is how it works: A user simply downloads the app from the Apple iStore or Google Play, sign up and go through a few simple steps to verify their identity, and then they can easily transfer euros or pounds to their Cabital wallet to buy Bitcoin, Ethereum and USDT with the best rates in the industry.

Cabital’s competitors provide high yields on cryptocurrency assets for users who stake or lock their native tokens, putting their customers at risk during volatile market conditions. 

Some of their cryptocurrency savings platforms’ native tokens are as much as 15% off from their all-time high, which will have many investors worried, especially when digital assets have been performing well recently yet platform native tokens haven’t bounced back.

We carefully select reliable investment projects. For CeFi and DeFi investments, we conduct a comprehensive due diligence review on the project prior to investing in them. 

For DeFi projects, we only consider those that require their borrowers to place collateral that exceeds the amount borrowed. 

Cabital is one of the safest and most secure platforms to buy and sell crypto and earn high yields on it. That is because our compliance programme is modelled after leading global financial service providers. 

We use SumSub’s biometric identity verification solution to manage the risk of identity fraud. To provide our customers with peace of mind, all customers’ crypto assets are held with Fireblocks, one of the world’s most trusted digital asset custody, transfer and settlement platforms. 

We have been using Chainalysis’ KYT and Reactor products since our formation to empower us to meet applicable regulatory requirements on AML in each of our markets with ease and agility.

Regardless of whether you’re new to crypto or you’re an experienced investor, you’ll find Cabital effortless and intuitive to use. You won’t find tons of features cluttering up your smartphone screen because we’ve built Cabital based on what our users want. 

Download Cabital now and start earning passive income off your digital assets! 

This article has been prepared by Cabital Fintech (LT) UAB  (the “Company”) and is general background information about some of the Company’s activities at the date of this presentation.

This article does not contain all the information that is or may be material to you and should not be considered as advice or a recommendation to you in respect of the holding, purchasing or selling of digital assets and does not take into account your particular objectives, financial situation or needs. This article has been made to you solely for information purposes. This presentation may be amended and supplemented as the Company sees fit, may not be relied upon for the purpose of entering into any transaction and should not be construed as, nor be relied on in connection with, any offer or invitation to purchase or subscribe for, underwrite or otherwise acquire, hold or dispose of any digital assets, and shall not be regarded as a recommendation in relation to any such transaction whatsoever. The contents of this presentation should not be considered to be legal, tax, investment or other advice, and you  should consult with your own counsel and advisers as to all legal, tax, regulatory, financial and related matters concerning an investment in or a disposal of such digital assets and as to their suitability for you.

This presentation and its contents are proprietary to the Company, and no part of it or its subject matter may be reproduced, redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (excluding the relevant person’s professional advisers) or published in whole or in part for any purpose without the prior written consent of the Company.

This article contains forward‐looking statements. Such forward‐looking statements involve known and unknown risks, uncertainties and other important factors. Certain forward‐looking statements are based on assumptions or future events which may not prove to be accurate, and no reliance whatsoever should be placed on any forward-looking statements in this article.

The information in this article has not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the presentation and the information contained herein and no reliance should be placed on it. Information in this article (including market data and statistical information) has been obtained from various sources (including third party sources) and the Company does not guarantee the accuracy or completeness of such information.