BusinessDay
Nigeria's leading finance and market intelligence news report.

How Libra, regulation could push cryptocurrency market into maturity in 2020

The year 2019 saw the cryptocurrency market take significant steps towards maturity. Unlike in previous years where much attention has gone to where the price of bitcoin will drop and regulators’ haphazard approach to putting controls in the space, the attention in 2019 has widened beyond price fluctuations – it was an exciting year for altcoins – and authorities have shown more intelligence in managing developments in the market.

Nonetheless, there is still a lot to learn from the cryptocurrency market. For instance, Libra, one of the major talking points in the market, especially for most Central Banks in the advanced world, was a clear indication that there were a lot of dynamics in the space that needed to be covered.

But Luno, one of the top ten best cryptocurrency exchanges in the world, said 2020 is likely the year the market comes into maturity. In a release sent to BusinessDay, the exchange which boasts over 3 million users and presence in more than 40 countries, gave three major events that would dominate the market in 2020.

The first is the continued maturity of regulations in the space. The entry of Facebook in 2019 with the Libra project certainly shook the world of finance and spurred authorities to pay more attention to the cryptocurrency market. As a result, a number of guidelines are set to come into play in the coming year.

Facebook cryptocurrency investigated by EU

The G7 group of nations including Canada, Italy, France, Germany, the United States, Japan, and the United Kingdom gave this indication when they outlined the need for stablecoin regulation in a report.

“We agree that no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks,” said Benoît Coeuré, Chair of the Committee on Payments and Market Infrastructures, G7 Working Group.

Japan also passed a bill in May which aimed to reinforce the country’s existing cryptocurrency laws. The bill is expected to come into force in April 2020.

A major regulatory development to expect in 2020 is the 5th Anti-Money Laundering Directive (5AMLD). The 5AMLD is expected to regulate virtual currencies and pre-paid cards to prevent terrorist financing and improve safeguards for financial transactions to and from high countries.

The second event is the continued rise in the adoption of cryptocurrencies in 2020. Luno expects more institutional investors such as banks, hedge funds, pension funds, endowments, buying into cryptocurrencies as they diversify their portfolios and finally have the professional machinery to do so.

The launch of Bakkt’s Bitcoin futures exchange in September has grown and was trading at a record 2,469 futures contracts on 22 November. This is expected to continue into 2020, potentially inspiring similar projects and competitors to offer a similar product.

Beyond regulation and adoption, Luno says the third event to expect is the transition of cryptocurrencies into new roles in global financial services. Despite regulatory pushback, the Libra project provides an indication of the new opportunities cryptocurrencies can provide the industry. Even with the bashing it received in the hands of US authorities, Luno says there may not be any stopping the project.

The Libra Association charter welcomed 21 new organisations in October. Forty wallets, tools and block explorers plus 1,700 GitHub commits have now been built on its blockchain testnet that has seen 51,000 mock transactions in the past two months.

“With Libra planning to sign up to 80 more members to the project, its potential impact is tremendous,” Marcus Swanepoel, CEO of Luno said. “It’s really a question of ‘when’ rather than ‘if’ and it is a game-changer for the sector.”

2020 will also see the number of Bitcoin rewarded to miners cut by half – also known as halving. The event is programmed to take place every four years or once every 210,000 blocks until the year 2140 when all 21 million bitcoins are estimated to have been mined. These four years are now almost up, with the next halving set to take place in May 2020.  The halving will see the block rewards fall from 12.5 to 6.25 Bitcoin. Experts believe that this increases demand for the cryptocurrency by further restricting supply. And the last Bitcoin halving in July 2016 preceding Bitcoin’s epic 2017 bull run.

“Finally we will see the launch of the long-awaited Ethereum 2.0, codenamed Berlin, we could see the death of ICOs and many people will sit on the fence over privacy coins,” Swanepoel said. “We started 2019 with Bitcoin at US$3,843 with a daily volume of US$4.3 billion and at the end of this year we are around US$7,200 with a volume of US$17 billion, having peaked at US$13,016.23 on the 25th June with US$45billion of BTC being traded.”

Get real time updates directly on you device, subscribe now.