Even though 2020 has been an absolute rollercoaster ride for the global economy, including cryptocurrency, it can be argued that the crypto industry is stronger than ever.
Indeed, despite the fact that there were some significant price dives earlier in the year, crypto has made a comeback. Hence, it can be argued that certain cryptocurrencies, including Bitcoin, are the best-performing assets so far in 2020.
Recently, Finance Magnates spoke to Steve Ehrlich, chief executive of cryptocurrency brokerage Voyager Digital, about how the pandemic has shaped his business and the cryptocurrency industry at large, and why now may be the perfect time to get into crypto.
The Biggest Slice of the Crypto Pie: “We Want the Mass Market.“
Finance Magnates asked Steve about how Voyager is approaching the market as a US-based company that primarily serves US customers.
“We see the market as three different parts,” he said. First, there are “customers that use the exchanges.”
These customers “want a deep, level-two platform; they want to see depth of liquidity. They’re the ‘pro’ users.”
In addition to these ‘pro’ users, there’s also a segment of users that engages with cryptocurrency markets on a more basic level. They are looking for “a very simple solution to buy Bitcoin and Ethereum, and maybe one or two other cryptocurrencies in the US.”
However, Steve said that Voyager tries to focus on the third segment of users, which is “the biggest part of the market.” This group is comprised of “customers who have a little bit more experience than those just entering the market.”
Steve explained that this group has guided Voyager’s development. This is why the company has made the decision to list at least forty cryptocurrencies for trading. Steve explained that Voyager is attempting to ensure the delivery of “the widest range of services and products to the general public to the mass market: so they can adopt crypto and start creating their own wealth off of digital and crypto assets.”
In other words, “we’re going for the biggest part of the market, not the most active sides of the market, where the pro traders are; we want the mass market, which is how online brokers have been built over the years as well.”
Steve also said that Voyager has established itself as a broker that aggregates liquidity rather than an exchange that addresses long-standing logistical issues in the crypto space: “the problem with a cryptocurrency exchange is that if you open an account with an exchange, [there’s only] one point of the liquidity.” Therefore, “if the exchange happens to be offline or they run out of liquidity, you can’t trade that asset anymore.”
When It Comes to Regulations, “There Are Always Challenges”, but Not in the Ways You Might Think
Voyager has also shaped its identity as an entity that is strictly based in the United States and primarily serves users who are also based in the United States. We asked Steve what the challenges have been on the road to establishing a crypto empire in the US when it comes to regulators.
“There are always challenges,” he said, particularly in a “lightly regulated” market space like cryptocurrency.
Steve explained that if regulations are being followed correctly in the United States, a cryptocurrency platform must become a regulated Money Services Business (MSB) under the Financial Crimes Enforcement Network (FinCEN), which is responsible for creating and enforcing money laundering laws in the US.
“Then, you get registered in individual states, and work with banks in the states in the regulated capacity,” he said.
However, “I think the challenge is that a lot of individuals and consumers still don’t look at that regulation in the same way. They look at the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC), or even the Office of the Comptroller of the Currency (OCC) or banking regulations.”
In other words, public misconceptions about which regulatory bodies are responsible for cryptocurrency platforms could make potential users hesitant: “I think people tend to be a little weary of trying to enter the space because they still think it’s unregulated.”
“But it is regulated,” Steve explained. “We have know-your-customer (KYC) rules we have have to follow, anti-money-laundering procedures we have to follow; we really do have to know our customers, and make sure that we’re abiding by all of the Patriot Act rules too.”
Hopeful for More Regulation in the United States
In addition to the baseline regulatory requirements, there are other things that customers can look to for reassurance.
Voyager, for example, is publicly traded on the Canadian Securities Exchange and in over-the-counter (OTC) markets in the United States. Therefore, “we have audited financial statements. Our internal controls are audited, so customers can get really comfortable.”
However, the perception of the cryptocurrency industry as being unsafe and unregulated is still “the biggest challenge: getting the mass public to realize that this is here to stay. That it’s going to change the way you live over the next ten years, and it’s time to get in.”
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Still, Steve is “hopeful that more regulation comes in the United States.”
“We’re starting to see it globally, as more and more regulators are starting to pay attention and starting to work toward building regulatory frameworks that work for each and every jurisdiction,” he said.
However, he also believes that the United States could be dragging its feet when it comes to regulating the cryptocurrency industry: “unfortunately, I still think that it’s a little bit further out than it probably should be,” he said.
At the same time, though, “there’s a lot of things to be thought through when it comes to regulation, and I think the SEC is being thoughtful about it without reacting too fast.”
“But I’d like to see it come sooner because I think the adoption will come even quicker.”
In the United States, a Second Round of Stimulus Checks Could Fuel Further Crypto Adoption
And in fact, Steve said that he believes the rate of adoption in the cryptocurrency space seems to be accelerating, particularly after the spread of COVID-19.
Steve specifically spoke about the phenomenon of United States citizens using their government-issued stimulus checks for the first time: “we saw quite a few customers buy more crypto, taking their $600 or $1200 checks and buying Bitcoin, Ethereum, Voyager Token, quite a few.”
Indeed, “we’ve seen it across a lot of the online brokers, traditional and crypto,” he continued. “All of our volumes are up, [Voyager’s] is up significantly since March; we’re doubling and tripling our business month over month. It’s amazing what’s going on.”
And Steve believes that if another stimulus check comes, people who have the financial stability to consider the check as extra cash should think about getting into crypto: “If you have the ability to use that money as an investment opportunity, the simple case is that [crypto] is the highest-performing asset in 2020.”
Of course, “I would never say, ‘hey, take your $400 check and go put it into crypto’ if you need it to put food on the table, but I do think that if you have it as disposable income, it’s probably the best investment right now.”
COVID May Have Decreased Public Faith in Fiat, Causing Investors to Search for Alternatives
Public perception of the value of fiat currency and other more traditional assets also seems to have shifted the narrative around cryptocurrencies.
“I think there’s something to be said about people wanting diversification of their assets,” Steve said. “Crypto is a great diversification; Bitcoin is part of a diversification strategy. I think people are starting to see that maybe [crypto] it’s not the most efficient payment mechanism, but it surely is digital gold. It’s a hedge against the stock market and against currencies.”
“We’re seeing more and more people get involved,” he said. “And it’s not just millennials, our average consumer age is on the high-end of what’s considered to be millennial.”
In other words, “I think you’re starting to see people really flock to this,” Steve said. “There’s such uncertainty in the government,” he added, referring to the quantitative easing measures that the United States Federal Reserve has taken to prop up the economy.
“That’s a lot of money,” he said. “I don’t know how we will ever get out of that debt as a country. We probably never will. We won’t in my lifetime, I can tell you that.”
COVID Has Reinforced the Case for the Development of CBDCs
The COVID-19 pandemic may have also accelerated another area of development related to crypto: the development of central bank digital currencies, or CBDCs.
“I think it’s probable that we’ll get to the point where each government will have its own digital currency,” Steve said. “I think it’s likely that will happen, and I think that it’s necessary. COVID has brought that out.”
After all, “we were already starting to get closer to a digital monetary world where people were carrying out most of their transactions via debit or credit cards” in the pre-COVID days, Steve said.
And COVID has certainly cut down on the use of physical cash: “I don’t know too many people that want to go to a restaurant or bar and hand the bartender a $20 bill; I’m not sure the bartender wants a $20 bill anymore. They might prefer to be paid digitally as well.”
Additionally, a CBDC would allow money to be moved faster and “into people’s wallets” more quickly than it can currently be moved through the traditional ACH banking system, which “tends to take three to five days.”
What are your thoughts on the development of a CBDC in the United States? How do you think COVID has impacted the crypto space? Let us know in the comments below.