While digital currencies have been going through a rough patch characterized by lackluster sentiment and low prices, progress in both regulation and infrastructure could help deliver the crypto spring that many are looking for.
Cryptocurrencies have had a rough year, losing more than 80% of their total market value year-to-date, according to CoinMarketCap.
While the total market capitalization (market cap) of these digital assets was more than $600 billion on January 1, that figure had fallen close to $110 billion at the time of report.
The market for initial coin offerings (ICOs), in particular, has been hard-hit, with many entrepreneurs struggling to raise funds using this approach.
Some have criticized the methods used in these token sales, which have frequently involved nothing more than a proposed blockchain-related idea outlined in a white paper.
[Note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Many of the companies that held these token sales in 2017, a time when the entire market was arguably suffering from ICO mania, have been encountering serious challenges.
"Issuers who went fast and loose in 2017 are feeling the pain," said Matthew Unger, founder and CEO of iComply Investor Services inc.
"The regulators are calling," he noted.
"Law firms are specializing in class action lawsuits - many with multiple wins against the biggest names in crypto."
Ben Tsai, managing partner of Genesis Holdings, offered a similar perspective.
"Currently, we are seeing pressure from regulators on previously raised ICOs," he stated.
"It started with the DAO Token offering being considered a securities offering, then the Munchee’s recision of their tokens after SEC’s directions, and most recently the Airfox/Paragon settlement to push for a recision after the fact."
While companies holding ICOs may be suffering amid this regulatory crackdown, these developments might benefit the broader space.
"We are now seeing a transition from ICO's to STO's (security token offerings) where the security tokens are built with regulatory compliance to take into account of AML/KYC/investor accreditation/total number of holders/etc." stated Tsai.
He emphasized that in addition to undergoing this shift, "we are seeing more infrastructure being built to support the business."
"Issuance platforms have come a long way," noted Tsai. These "provide a second layer of protocol on top of the blockchain to keep the tokens compliant."
"Custodians are also becoming compliant, with qualified custodians appearing in the past 6 months," he stated.
Unger also spoke to the progress in the industry's infrastructure, stating that it has improved significantly over the last year, enabling the ICO market to transition toward security tokens that are fully compliant.
This progress could be the key to pulling the cryptocurrency market out of its current weakness, stated Tsai.
"With the infrastructure in place, we are seeing more legally compliant products being issued," he said.
"This will bring the institutional investors into the market, which will thaw out the Crypto Winter and bring a Crypto Spring."
While Tsai provided an optimistic forecast, nobody knows for certain just how long lackluster market conditions will persist.
"This bear market could last for several years, or we could see it end in a matters of weeks or a month," stated Oliver Isaacs, blockchain investor, advisor & influencer.
"What is clear to me is that digital assets are going survive and be very relevant in a world which is increasingly digital.”
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