Regulatory Uncertainties Downplays Blockchain’s Possible Impact – BoA
Following the challenges facing the virtual asset industry, the Bank of America (BoA) has revealed that the ongoing regulatory uncertainty has lessened the effect of blockchain growth and adoption.
The bank noted that sentiments regarding cryptocurrency have been low in recent weeks as the US Securities and Exchange Commission (SEC) continues its clamp down on exchanges in an attempt to enforce regulations.
Poor Crypto Sentiments
According to a recent research report by BoA, the demand for high-risk assets has increased. However, the digital asset has shown a 24% underperformance rate compared to the Nasdaq stock index since May, even though the former recorded a 52% surge at the start of the year.
The disparity highlights the dynamic nature of the market and the varying performance trends across different virtual asset classes. Analysts Alkesh Shah and Andrew Moss added that the sentiment surrounding digital assets continues to be negative due to the regulatory uncertainty caused by enforcement actions of the SEC.
They added that this uncertainty had wielded downward pressure on the price of most tokens. The analysts further noted that while digital asset trading platforms play a significant role within the broader ecosystem, they represent one component of the crypto landscape.
They explained that there is more to the digital asset industry than crypto trading platforms, and more complex dynamics affect the broader industry. Earlier this month, the securities regulator filed a lawsuit against Changpeng Zhao, the founder, and CEO of the world’s largest crypto trading platform, Binance.
Similarly, the regulator accused the leading American crypto exchange, Coinbase, of violating federal securities laws in the country.
Excessive Regulatory Scrutiny
In its analysis, the BoA argued that there is an overemphasis on regulatory challenges, the approval of spot bitcoin exchange-traded funds (ETFs) in the United States, and concerns regarding illicit activities. According to the bank, this extreme focus on cryptocurrency and its attendant issues has overshadowed the remarkable progress and seamless integration of distributed ledger and blockchain technology infrastructure.
Hence, the bank believes this technology’s true potential and transformative capabilities may not be appreciated due to the distraction that the regulatory uncertainties bring. The report also highlighted the significance of private permissioned distributed ledgers and blockchain subnets in facilitating the tokenization of conventional financial assets.
According to the report, these innovative technologies offer a transformative medium for digitizing and representing traditional financial instruments. Therefore, they open up new possibilities for efficiency, accessibility, and liquidity in asset tokenization.
The report added that by leveraging the capabilities of private permissioned distributed ledgers and blockchain subnets, the financial industry could witness a paradigm shift in how traditional assets are managed, traded, and accessed. Nevertheless, the bank predicts blockchain systems and tokenization will fundamentally transform financial and non-financing infrastructure and markets within five to ten years.
The BoA report further predicts that this technology will shape how various industries operate, facilitate transactions, and create new avenues for value exchange.
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