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Cardano Doesn’t Like Crypto Regulation, Neither Should Crypto Investors

Cardano (CCC:ADA-USD) is garnering recent headlines, but not so much as a potential successor to Ethereum (CCC:ETH-USD). 

A concept coin for Cardano (ADA).

Source: Shutterstock

Nor is it getting attention thanks to its smart contracts capabilities following the earlier Alonzo upgrade.

Rather, Cardano is making news these days based on the opinions of its founder, Charles Hoskinson, as they relate to cryptocurrency regulation. 

Hoskinson hasn’t pushed for a minor shake-up of the current environment. Instead, he seems to be advocating for significant changes.

New Regulatory Body

Hoskinson notes that cryptocurrency doesn’t fit neatly into the current scheme of regulatory bodies and asset types. He also implies that crypto should not be treated as either a commodity or a security, stating: 

It needs to be regulated based on how it’s used. You need a different regulatory system and that doesn’t really map so well in the US because, usually, what we do is we create a regulatory body for an asset type: the CFTC handles commodities, derivatives as the Securities Exchange Commission handles securities.”

It almost suggests that Hoskinson is advocating for the formation of a new regulatory body dedicated to cryptocurrency.

That, however, almost certainly won’t happen. The alternative, highly likely scenario is that the SEC will gain much more oversight into cryptocurrency moving forward. 

That’s a negative thing for Cardano, and crypto broadly. 

Oversight Hurts, Doesn’t Help

Regulation of cryptocurrency either heralds a new wave of growth, or ushers in a slowdown depending on your perspective. 

Yes, increased oversight establishes a codified set of laws defining what is and isn’t allowed in the novel world of defi, blockchain and cryptocurrency. That arguably lends more trust and investment capital over time. 

But, if like Hoskinson, you are skeptical of the purported benefits, there’s plenty to suggest that’s simply not true.

He draws a parallel between Suspicious Activity Reports (SARs) institutions currently rely on and SEC regulation of crypto. 

He notes that SARs are first identified almost exclusively by the institutions themselves rather than the IRS.

“That means 99% of the time, it’s not the IRS discovering something on its own, or the SEC discovering something,” Hoskinson said. “It’s actually reported to them by a financial intermediary.”

So increased SEC oversight of crypto means regulators don’t know anything more about cryptocurrency, they simply police it more. That SEC oversight pulls prices down but does little to actually prove the SEC provides a clearer framework. 

It looks like greater policing more than anything else. Fair enough, that’s what a commission does, but to Hoskinson’s point, SEC intervention won’t be a positive. 

Implications for ADA Prices

Hoskinson’s comments bear little correlation to ADA prices in this case. There’s probably little investors and traders can take from his remarks that they can directly capitalize on from a price perspective. 

But it at least suggests that Cardano’s management is keenly following the regulatory changes, coming to its own conclusions, and publicizing them. 

In other words, Hoskinson is attempting to set himself and his firm apart as thought leaders as it relates to regulatory actions governing the crypto landscape. 

The Cardano team has a reputation as a sort of assembly of high thinkers, even in the crypto space. They seem to play the long game in a space that too often is defined by flashy projects with much less substance. 

That makes Cardano a less attractive investment in some sense. But it also means Cardano is likely to make smart moves in consideration of the future impending crypto landscape. 

What to Do With Cardano

I remain a fan of Cardano and what they are building. The firm has entered the third of its five phases, Goguen, with the advent of smart contract capability.

There’s probably little to suggest ADA is moving up or down currently, but I’d bet on it in the long term with great confidence. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

Article printed from InvestorPlace Media, https://investorplace.com/2021/11/cardano-doesnt-like-crypto-regulation-neither-should-crypto-investors/.

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