A Domino Effect: Stablecoins are Winning Over the Institutional Investor

By Armin Schmid, CEO of Swiss Crypto Tokens AG , part of the Bitcoin Suisse Group

With JP Morgan recently creating the first digital currency to be backed by a major US bank, along with the launch of Fidelity's cryptocurrency trading platform and Facebook’s plan to launch a stablecoin for Whatsapp money transfers, the credentials of digital assets have been elevated significantly in recent months. On top of this, there has been a powerful swell in the amount raised for blockchain projects through VC funding, up 280% since 2017 — an expression of the growing confidence among investors when it comes to the viability and longevity of blockchain technology and digital assets.

On the education front, strong endorsements from the likes of New York University and the University of California, Los Angeles (UCLA) with the creation of tailored, blockchain-focused courses, have showcased the value of careers on the blockchain. UCLA and NYU are not alone. A recent Coinbase report highlighted that almost half of the top 50 universities worldwide are now providing courses in blockchain technology and cryptocurrencies.

The same Coinbase report identified the Swiss Federal Institute of Technology Zurich among the top 10 Universities that offer blockchain courses. These endeavors, coupled with a vibrant blockchain jobs market, represent the vital signs of this ever expanding ecosystem.

As blockchain continues this run of ‘winning over’ established bodies and institutions, this trend of mainstream acceptance has extended to Wall Street and institutional investors, a category of investor that once shied away from cryptocurrencies, citing volatility issues. We’ve even seen the likes of George Soros, an unapologetic skeptic of cryptocurrencies in January 2018, subsequently announce plans to trade in bitcoin Institutional investors, seeing the prioritization of trust and transparency in the global crypto ecosystem, are the latest vehicle for accelerating mainstream adoption of digital assets.

A recent report by Boston-based Cambridge Associates depicted the current crypto landscape as fertile ground for exploration by institutional investors — and it seems the ball has already been set in motion, with institutional investors responsible for 66% of capital inflows for digital assets in 2018, unsurprisingly correlating with a mellowing of the crypto market.

So as the involvement of institutional investors becomes more pronounced, will this momentum endure? Well, with any investment model, it is difficult to predict the actions of specific categories of traders. However, one thing is for certain, the familiarity and sense of security attributed to stablecoins is enticing institutional investors to explore the crypto sphere. As long as the values of trust and transparency remain deeply rooted in the stablecoin model, the outlook is positive.

A survey carried out by the Global Blockchain Business Council (GBBC) indicated as such, suggesting that 41% of institutional investors will invest in ICOs in the next five years. Earlier this month, PwC’s report on the ICO and STO landscape illustrated the strong momentum behind STOs over the last several years, and predicted further growth for this funding method throughout 2019 and 2020.

In the coming years, the key focus for a sustainable blockchain space must revolve around regulation. Just like the aforementioned actions of educational institutions and major platforms such as Facebook and JP Morgan, the endorsement of institutional investors is hugely significant to the credibility and perceived accessibility of digital assets among citizens around the world. It can also have more positive ripple effects in terms of spurring policymakers into action, encouraging them to deliver regulation that fosters innovation and provides the necessary security for projects to thrive.

For too long, regulatory ambiguity on the global stage, especially around securities, has reinforced the glass ceiling holding back mainstream adoption of blockchain technology. But this doesn’t have to be the case anymore. With institutional investors giving their seal of approval, buoyed by the arrival of stablecoins, I have every confidence that regulatory advances will be accelerated globally. Then, we will edge ever closer to our collective vision of mainstream adoption.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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