A look at why backroom Bitcoin conversations matter more than ever.
In cryptocurrency, the buzz around surging Bitcoin prices often captures the spotlight. Still, it’s essential to recognize that the true indicators of cryptocurrency adoption are the quiet discussions unfolding in the backrooms. The wildest days of crypto, marked by rebels and outlaws, are rapidly fading into the background, making way for a new era of robust and legitimate businesses. To understand the future of cryptocurrency, one must follow the flow of investment dollars, and these dollars are increasingly being channeled into established well-regulated ventures.
Institutions, venture capital firms, and angel investors are placing their bets on early-stage companies, and where they invest speaks volumes about their expectations. More often than not, these investments shape the future, as well-funded enterprises in their infancy often evolve into industry leaders.
Today, institutions are backing well-regulated companies led by experienced professionals. The hushed backroom conversations center on supporting firms that will operate seamlessly within the established financial system, to realize the full potential of the digital asset class. The conversation has shifted dramatically.
Gone are the days when inexperienced young entrepreneurs easily secured vast sums of capital for their ambitious crypto ventures. Investors have come to understand that regulation impacts all aspects of financial services, however, this realization may have taken some longer to set in and hit harder for others.
When individuals engage with cryptocurrency and the financial system, they inevitably rely on intermediaries. In the USA, banks are arguably the safest institutions for consumers. Since the establishment of the Federal Deposit Insurance Corporation (FDIC) in 1934, not a single insured deposit has been lost due to a bank failure. Participants in the digital asset class should not have to entrust their funds to firms that haven’t earned the same level of trust.
To fully realize the potential of digital assets, there must be closer integration with the established financial services industry. Market participants need seamless transitions between banking and the digital world. In areas involving financial transactions, especially for firms entrusted with safeguarding others’ funds, change must occur through evolution, not revolution.
On this journey, we’ve encountered company founders who shared their vision of integrating digital assets and blockchain technology into mainstream financial services. They, too, left secure careers to create something new, and our experiences over the past few years mirror theirs.
Today, people are engaged in discussions with investors of all scales, and they are drawn to companies like ours that operate within the bounds of regulation. Compliance and adherence to best practices are highly sought-after attributes. Nearly every investor now has questions about regulations, marking a significant shift in the investment landscape.
The early fundraising days were challenging, with the most common question from the crypto community being, “Why a bank?” For those less familiar with the asset class, sentiment was quite the opposite back then. In those days, we often felt like we were swimming against the current, facing skepticism from those who didn’t see the potential of digital assets.
Today, digital assets are recognized as a legitimate financial asset class and an integral part of diversified portfolios for mainstream investors. Cryptocurrencies with larger market capitalizations, such as Bitcoin, are seen as a unique and growing asset class.
In 2018, Gene encountered resistance from a young man who vehemently opposed the idea that cryptocurrency could be a responsible investment. He believed he should be exempt from any rules, operating in a world with no restrictions. He wanted to accumulate wealth without adhering to any regulations. I wonder what became of him, whether he achieved his dreams of prosperity or faced a harsh reality.
That same year, Gene delivered a speech at a major conference, emphasizing the importance of playing by the rules to ensure the protection of investors. My concern was not about price volatility but about safeguarding financial intermediaries. History has shown that regardless of the asset class, protecting customer assets and preventing bad actors from misappropriating funds are legitimate concerns. At the time, my speech was met with ridicule and boos.
The excitement in the cryptocurrency community today revolves around the possibility of exchange-traded funds (ETFs) for Bitcoin and other digital assets. Before an ETF can be created and listed, it must receive approval from the Securities and Exchange Commission (SEC), a process that has yet to come to achievement. The fact that cryptocurrency market participants are eagerly awaiting regulatory developments is a clear sign of how the market has matured. I can’t help but wonder what my sneaker-wearing friend is thinking now.
While Bitcoin’s recent price surge to the mid-thirty thousands is certainly noteworthy, the most promising signs for the future of cryptocurrency are evident in the sustained investment activity within the supporting infrastructure.
These secretive backroom conversations reveal that the digital asset class is here to stay. We are part of these discussions, and the next generation of companies supporting the digital asset class is committed to playing by the rules, ultimately paving the way for mass adoption. The optimism in the air is truly encouraging.