While we will discuss the intricacies of blockchain financing in the following chapters, the point stands that a huge amount of capital currently flowing through this industry attracts a significant amount of attention, both positive and negative. A significant flight of capital from mainstream economies and traditional securities has attracted the attention of global governments and intergovernmental bodies. The industry has also been marred by several stories of fraudulent behaviour causing legal entities to consider imposing stricter regulations to protect the consumers and investors.
Until recently, a blockchain startup could benefit from an environment of legal ambiguity. However, this legal vacuum is changing fast as mainstream legal entities catch up with this encroaching phenomenon. While the legal developments themselves are fast evolving and vary from region to region, a more definite governmental response will undoubtedly affect future ICOs limiting the speed of innovation and disruption in the industry. Such future regulations need to be closely monitored and taken into an account when starting a blockchain business.
One of the legal areas revolving around blockchain organisations is the question of how funds are gathered by young projects. Long gone are the days of straightforward crowdfunding campaigns. For example, more and more countries and ICO platforms are now bound by stricter investor registration requirements. We will explore this particular aspect of regulation in more detail in the folllowing chapters of Business Academy.
On the positive side however, many countries are becoming more favourable in helping existing blockchain projects find a place to call home. With some areas of Switzerland paving the way in the early days of the recent blockchain boom, we now see many more places in Europe and beyond adjusting their business and taxation practices in order to facilitate the rise of their own nascent blockchain industries.
Unfortunately not all countries around the world are taking a welcoming, or at least ‘do not harm’ approach to this upcoming technology. Some are taking this stance in order to protect the seemingly harmful effects these new avenues of capital would have on central banks and their financial industry. In more specific cases, certain states have ever murkier reasons to not fully embrace this phenomenon. If we consider the disruptive consequences of blockchain technology, many authoritarian states are not keen on allowing this industry to take hold in their country. Some rogue countries, such as Venezuela, go even further by using the technology to bypass economic sanctions and be able to gather resources in order to fund illicit activities of their regimes. Misunderstood stories of destructive, fraudulent behaviour and mishandling by ill-willing power structures serve to downplay the potentially beneficial effects of embracing blockchain technology. These arguments often become ammunition for sceptic traditional industry and political leaders.
While this may change in the future, the current outlook for blockchain remains positive. Most of the developed economies have doubled down on not interfering or curbing the overall growth of the global blockchain industry. This was perhaps due to the fact that the rise of the blockchain ecosystem has proven to be much more industry-friendly than previously expected. With the rise of market caps and an influx of non-blockchain natives within projects in roles spanning from development, design to marketing and advertising, industry priorities and attitudes slowly change from idealism or pessimism to pragmatism. As the industry matures further, we can expect new legislation which cover crucial areas such as funding, as well as new blockchain industry practices that protect participants and prevent malpractice. As the space evolves and new businesses join with their own propositions, we can expect the scene to grow even further, both in respect to regulations and new organisations, created according to already pre-existing conditions dictated by their respective legal body.
What is a Cryptocurrency?
A cryptocurrency is a tradable digital asset or digital form of money, built on blockchain technology that only exists online. Cryptocurrencies use cryptography to verify and secure transactions, hence their name. There are currently well over one thousand different cryptocurrencies in the world and many people see them as the lynchpin of a fairer, future economy.