Nigel has been in the regulated financial services industry for nearly a decade, has previously owned a financial brokerage and has written many times for sites relating to personal finance and trading.
There is no denying the immense growth of the cryptocurrency sector, and it is all the more impressive when the realization that the concept as a whole is little over a decade old. In the 10 years since Bitcoin burst onto the scene, there have been many significant steps forward for crypto and the industry that now surrounds digital coins and blockchain tech has made great strides towards achieving the stated aim of a decentralized form of money.
However, amongst the general public, there are still misunderstandings, misgivings, a lack of trust and understanding about the crypto sector. Much of this comes from a mass media image of Bitcoin being the way that scammers and hackers like to be paid, and a more general impression of a ‘wild west' landscape in which anything goes. This isn't conducive to a wider take-up of cryptocurrencies for everyday use, and that is of interest to CFD traders because the greater the volume of transactions, the more opportunities there are for trades.
With online exchanges for crypto trade still seen as something of a specialist interest and as being prone to hacks and attacks, it's no surprise that many outside of the industry are wary of holding large amounts of funds in crypto assets. So, what is next for the track that crypto is on, aimed at mass adoption?
Jackson Zeng is the Chief Operating Officer at Caleb and Brown, a cryptocurrency brokerage based in Melbourne, Australia, and he believes that there are three main areas in which the wider adoption of crypto faces big challenges. One of these is the question of regulation, where it will come from and how it will affect the development of digital tokens.
“Financial regulators must approach the cryptocurrency space with the same degree of monitoring and scrutiny to ensure the interests of the consumers and businesses are both protected. A standardised framework around the security, financial and auditing requirements needs to be developed by regulators”, Zeng says.
With money laundering being a big issue for the perception of crypto, financial sector regulations would seem to be the obvious answer. However, this clashes with what Zeng calls “an inherent scepticism of governments” and centralized control that is prevalent in the wider crypto community and indeed forms much of the bedrock of the original Bitcoin white paper.
“Unfortunately, to see a significant increase in societal adoption, the everyday investor must feel comfortable enough to invest in the space as well. Without an appropriate cryptocurrency exchange framework in every jurisdiction, bad actors may continue to operate and eventually fail due to misconduct”, warns Zeng.
Another issue that Zeng raises is the twin concerns of security and accountability. These are natural worries that arise when anyone is looking towards their own funds and where to store them or exchange them. Zeng singles out the hack of the New Zealand based exchange Cryptopia as well as the headline-grabbing story revolving around the mysterious disappearance of the private keys of the Canadian exchange QuadrigaCX.
Both of these examples highlight concerns about trusting a third party to care for assets. Of course, crypto supporters would argue that the entire ethos of Bitcoin was built on direct peer-to-peer exchanges that effectively made a third-party interaction unnecessary. However, with many digital wallets including a third party, this falls by the wayside for many day-to-day crypto users. The rise in heightened security applications, such as two-factor authentication and different sigtech approaches, is going some way to answering these questions, but there is a long way to go before a casual user might think of a crypto exchange as having the same level of stability and safety as a major high street bank.
If the industry itself does raise the bar to beat these types of issues, then the question of educating the public to know about it is the third major challenge, according to Zeng.
“The final avenue is to improve personal and institutional education surrounding cryptocurrencies and safe handling practices. As it currently stands, educational resources within this space are more prevalent and accessible than ever”, he says.
“First and foremost, truly understanding the risk and volatility of an infant marketplace such as this is an important, and oftentimes painful, learning curve. You must ensure you are aware and confident in the security and custody standards of your preferred exchange service, so you can better protect your investments”, Zeng adds.
When all it needs for an account to be compromised is an email address whose security has been broken, problems are highly likely. That's why stronger security protocols including 2FA can help but using cold wallet storage might be the ultimate answer, suggests Zeng.
However, the complications of converting to cold wallet storage outweigh the obvious security advantages for some. Ledger, Trezor and Keepkey are singled out by Zeng as worthwhile ways to gain and keep control of digital investments and assets, but more work needs to be done to let the general public know of the existence of these, let along the advantages they can bring.
In order to reach widespread adoption, the crypto sector must play the long game and look far into the future. Even though things are moving thick and fast in some areas, which is one of the reasons many CFD forex traders are drawn to the sector, there is still a long way to go in each of the three big challenges outlined here. The positive side of things is that so many different players can see the long-term advantages of crypto that momentum is now too strong to let any negative influences hold it back.