For the past decade, crypto trading has been a virtual gold rush as amateur and professional investors alike have flocked to the industry. It has been possible to make (and lose) a fortune overnight, and there are ways to realize such sizeable profits from a single trade. That’s all about to change.
More and more regulatory moves from governments around the world, such as the recent United States Financial Crimes Enforcement Network announcement, leave no doubt that crypto is poised for a radical transformation. This will have consequential implications for investors, but will it be for the worse?
One thing is clear: We will no longer see anything similar to decentralized finance or initial coin offerings in terms of the speed and size of returns. In this article, we’ll review why that is and discuss upcoming alternative ways for investors to continue to make money with cryptocurrencies. Finally, we’ll take a closer look at one company that is shaping the future of crypto today and what it could mean for your crypto investment portfolio.
How money is made in crypto
To understand why the common ways of making money in crypto have become problematic, we need to first understand what those ways are. There are two primary approaches to obtaining compelling returns in crypto:
- Surfing the hype cycle: This means buying a token before it pumps and selling it before the dump in short-term flip-flops. Given a lack of patience, this is what most crypto investors look for in a trade.
- Alt holds: Long-term hold of decent altcoins can provide triple-digit returns in the horizon of just a few months or years.
Regulation fundamentally reshapes the industry
The principal reason why get-rich-quick schemes are going to vanish is increasing regulation. In July 2019, the Financial Action Task Force, an international regulatory body, issued guidelines on regulating digital assets. These rules are now being adopted by FATF members, which includes more than 200 jurisdictions.
The rules include:
- Prohibition of market manipulation.
- The requirement to register investment tokens as securities.
- KYC requirement for all exchanges and wallets.
These rules essentially eliminate primary ways of making money with crypto:
- The prohibition of market abuse and disclosure rules pushes pump-and-dump coins into a very obscure area.
- Requirements to register tokens as securities dramatically increase cost and reduce access to altcoins for investors.
And these rules don’t just exist on paper. Since 2018, the U.S. Securities and Exchange Commission alone filed 55 lawsuits against token issuers, including Telegram, EOS and Ripple. As a result, it has become increasingly difficult to launch unregulated crypto coins that promise 100%+ returns.
How to invest in the crypto of the future
This fundamental regulatory disruption will make crypto much less attractive to investors. However, there are a few notable players that are shaping the industry into the new form it will take tomorrow.
With increased regulation and scrutiny, there is only one type of coin that can legally provide triple-digit returns in a few years — security tokens.
Security tokens are crypto tokens that are regulated as traditional financial instruments. While security tokens have actually been around since 2017, several issues have slowed down their adoption. Stobox provides approaches to solve these problems.
Stobox is an award-winning company in the field of security tokens and shapes the industry by advising governments on legislation for digital assets and developing next-generation infrastructure. With its security token technology and upcoming crypto exchange that is powered by a utility token STBU, Stobox is a prime example of where the industry is heading.
Problems to be solved with issuing security tokens
Early-stage financing
Issuing security tokens in the early stages is quite expensive with costs reaching hundreds of thousands of dollars.
Stobox solves this problem by standardizing legal processes and providing issuers with a Digital Securities Dashboard with built-in legal compliance features, which reduce issuance costs from hundreds to tens of thousands of dollars, making the sale of security tokens much more accessible to small businesses.
Stobox serves as a proof-of-concept and utilizes the DS Dashboard for its own security token offering. Interestingly, it is possible to pay for Stobox tokenized shares STBX with its utility token, STBU.
Liquidity
Security tokens will be less liquid than the coins you are used to today. The question is: “Exactly how much less liquid will they be?”
Currently, few security tokens are traded at all because centralized securities exchanges are highly regulated and expensive.
The alternative that Stobox is building is called DS Swap, a decentralized securities swap protocol similar to Uniswap. Unlike centralized exchanges for security tokens, DS Swap is not a venue with many listed tokens. Instead, each company operates a separate liquidity pool solely for its own tokens via their DS Dashboard.
Thanks to decentralization, such a system does not require a license. As a result, businesses enjoy fewer barriers to entry and easier access to liquidity provided by the DS Swap.
How will the crypto world change overall?
The absence of enforceable regulations naturally creates incentives for one-day projects. As professional crypto traders, do we want the industry to be like that forever? Can we ever see mass adoption if most projects remain quick scams?
Sure, we may lose many people who are dumping money into crypto today. But, for the most part, these “traders” are actually gamblers. And as the industry matures, more real investors and institutions will want to take a bigger bite out of the crypto pie.
The industry is changing rapidly, and this cannot be avoided. And the reality is that it is changing for the better. Regulated offerings that create real responsibility for issuers are the future, and crypto companies have to learn to adapt in order to survive in the new world.
Stobox shows how it should be done. DS Dashboard and DS Swap solve the problems that have made issuing security tokens unfeasible for so many businesses, thus paving the way for the next generation of regulated crypto coins in a smarter, more transparent market.