Digital

Digital Currencies – particularly Bitcoin – Aren’t Going Anywhere

Digital Currencies, mainly Bitcoin Now In Mainstream Demand   

Bitcoin (BTC) and altcoins are not going anywhere. The digital currency revolution is real, but it still needs to go through its growing pains as is indicative by the current bear market. There are a number of major developments in the cryptosphere that confirm the legitimacy of Bitcoin as a convenient, reliable, and decentralized model facilitating the exchange of value. Additionally, traditional financial companies are taking cryptocurrencies seriously, as they realize their vast potential, and are now responding to requests from their clients to incorporate Bitcoin (BTC) and other cryptocurrencies in their services and products. One such traditional financial services firm that has decided to do so recently is Sygnia.

South African Sygnia Asset Management company has announced that it will launch its own cryptocurrency exchange at some point this year. Magda Wierzycka, the firm’s CEO, said the exchange which will be called SygniaCoin and will be introduced in 3rd quarter 2018. The CEO noted: 

“The cryptocurrency market is evolving at a rapid pace internationally and domestically, and is attracting both domestic and international flows. With its fintech focus, Sygnia is well-positioned to become the first major financial services institution to embrace cryptocurrencies and to offer investors a secure trading and execution platform backed by an international infrastructure, well-designed custody and integration with standard savings products.”

Many Traditional Financial Companies Jumping into Crypto

Although Sygnia Asset Management currently manages over $14 billion in client assets, the statement made by Wierzycka might not be completely accurate. That being Sygnia is definitely not the only “major” traditional financial institution to attempt to offer crypto services. There are other financial industry giants such as UK’s LMAX Exchange, which has helped their clients trade $10 trillion in fiat currency, that has also announced the launch of their own cryptocurrency exchange. 

The Broader Outlook

The bigger picture is that institutional investors have remained on the sidelines because there’s not yet been a way to safely and securely store valuable digital currencies. Now though, it appears that Sygnia Asset Management plans to bring custodian services to crypto, along with LMAX Exchange and Coinbase.

Similar to the focus of efforts noted by LMAX and Coinbase, Sygnia intends to place heavy emphasis on complying with regulations and security. Some would argue that crypto is not meant to be regulated, however, many would agree that if they have something valuable, be it any type of asset – digital or physical, that they would not want to lose that asset. So until crypto technology has evolved to the point that it no longer has significant security vulnerabilities, a sensibly regulated crypto market that strikes an optimal balance between not stifling innovation while also preventing fraud seems to be the best course of action.   

Taxation System for Cryptocurrencies Under Development 

In light of this development, Wierzycka pointed out that digital currency trading and related profits are taxable according to South Africa’s Revenue Service (SARS). Per the Sygnia CEO, a more comprehensive regulatory framework for cryptocurrencies is being worked on by the country’s regulators. For now, her company will adhere to guidelines for crypto related businesses currently available and provided by New York State such as BitLicense in August 2015.

To better serve both retail and institutional investors, Sygnia intends to allocate a fund specifically to be used for investments in a number of different digital currencies. This fund would be managed by Sygnia for its clients. In addition to keeping traditional assets in their Sygnia portfolio, clients of the company will be able to manage their cryptos through the same interface. 

Reserve Bank of South Africa Careful Not to Stifle Crypto Innovation

Recently, the reserve bank of South Africa classified digital currencies as “cyber tokens” and stated that they “don’t meet the requirements of money.” This appears to be a follow-up of the central bank’s appointment of a fintech research group this year, which was tasked with examining regulatory requirements for cryptocurrencies. Notably, last month the bank announced that it had put together a self-regulatory body to monitor the developments in the cryptocurrency and fintech sector. The main goal of this self-regulatory entity is to avoid “systemic risk” while also not stifling innovation in the rapidly evolving crypto and blockchain industry.