Automatically monitor regulatory updates to map to your internal policies, procesures and controls. Learn More

1558 Enforcement Actions in the U.S. over past 30 days


FTC enforcements decreased 55% over the past 30 days


SEC issued enforcements: $37,812,859 over the past 30 days


50 Final Rules go into effect in the next 7 days


49 Mortgage Lending docs published in the last 7 days


1670 docs with extracted obligations from the last 7 days


new Proposed and Final Rules were published in the past 7 days


11906 new docs in within the last 7 days


Considering RCM Solutions?  Here’s an RFP to get started.

rough ride for crypto

The bull market for cryptocurrencies cooled off last year, as the technology ran into major roadblocks, including regulatory constraints, fallout over illegal ICOs (Initial Coin Offerings) and criminal indictments for crypto mining fraud. After a turbulent 2019, my level of skepticism about whether cryptocurrency will be widely adopted in 2020 has increased significantly.

In talking with my company’s prospects, customers, advisors and investors, including financial institutions and banks, I have heard growing doubt regarding the underlying technological foundation of cryptocurrencies – blockchain – with financial experts regarding it as a “technology in search of an application.”

In 2020, I expect cryptocurrencies to run headfirst into four key challenges that could threaten the very viability of blockchain-based cryptocurrencies:

  1. Consumer privacy laws vs. blockchain’s core value proposition

A new wave of regulations that protect consumers’ private data run counter to blockchain’s core concept: its immutable, distributed ledger. The problem is that the blockchain ledger tracks not only transactions, but also user activity. New consumer privacy regulations, such as the GDPR in Europe, emphasize a consumer’s “right to be forgotten,” which is at odds with blockchain’s design.

In the U.S., California’s consumer privacy law, CCPA, which takes effect this month, offers a similar set of protections as GDPR. While the “right to be forgotten” isn’t as far reaching as with GDPR, CCPA guarantees a consumer’s right to delete data, which isn’t possible with blockchain-based financial solutions.

Another major regulatory roadblock is the EU’s Fifth Anti-Money Laundering Directive (AMLD5), which went into effect on January 10, 2020. Following a string of terrorist attacks in Europe and the publication of the Panama Papers, the European Parliament (EP) passed AMLD5 to stop terrorists and transnational organized crime syndicates from laundering money through legitimate financial institutions.

AMLD5, which builds on four previous anti-money laundering (AML) directives, requires cryptocurrency exchanges and various service providers to register with local regulators and prove that they know who their customers really are. Crypto service providers must also prove they have faithfully followed thorough AML procedures in order to maintain compliance.

  1. Fiat “stablecoins” threaten existing crypto exchanges

Later in 2020, there’s a good chance the U.S. Federal Reserve will move forward with a federal USD digital currency, or “stablecoin,” backed by the full faith and credit of the United States.

This would place competing digital currencies at a distinct disadvantage, but I nonetheless expect that adoption of the stablecoin will be slow. U.S. consumers have not yet expressed any significant demand for digital currencies to date.

The European Union is also expected to publish its plans for a Euro-backed stablecoin, which will be managed by the European Central Bank. Unlike in the U.S., where consumers have been laggards with regards to new payment methods, such as m-payments, EU consumers may well adopt the Euro-Coin in higher numbers than the U.S.-backed stablecoin, but complying with its own stringent AML directives will be a non-trivial challenge for the Euro-Coin.

  1. Does anyone trust Facebook with crypto?  

A wildcard in the adoption cycle of cryptocurrency is Facebook. Despite its numerous missteps handling private consumer data, Facebook leads and governs the Libra Association, a nonprofit cryptocurrency organization.

Libra received a boost in late 2019 when the Swiss Financial Market Supervisory Authority (FINMA) indicated that it would not impede the development and rollout of Libra. This means that despite a string of stinging setbacks in 2019, Libra Association’s investment tokens and its Libra stablecoin, a digital currency pegged to a basket of underlying assets, will have a big role in determining the future viability of cryptocurrencies.

Initially, the Libra Association will attempt to exclude U.S. persons from directly purchasing Libra currency, in furtherance of Facebook CEO Mark Zuckerberg’s commitment to U.S. officials in 2019 to forego the launch pending U.S. regulatory approval. However, considering Facebook’s and Zuckerberg’s track record of covering up inconvenient facts, and possibly even lying to Congress, I recommend taking this pledge with a grain of salt.   

In fact, after proving impracticable or undesirable from the perspective of the Libra Association, I expect that the exclusion will be dropped, notwithstanding the lack of approval by U.S. regulators. The public and political reaction to Facebook’s ask-for-forgiveness-not-permission tactics is a key crypto trend to watch in 2020.

  1. Dark-horse threat on the horizon

Finally, there is a dark-horse threat that could eventually trample the viability of blockchain-based cryptocurrencies as early as late 2020: quantum computing.

In late 2019, Google announced that it had achieved quantum supremacy with its Sycamore 54-qubit superconducting chip. This led John Mayo-Smith, former EVP and CTO of R/GA, to write a Medium column in which he calculated that Google’s Sycamore quantum computer could mine all 3 million remaining Bitcoins – which with current chip technology is expected to take at least 120 years – in less than 2 seconds.

Mayo-Smith has since deleted his post after his back-of-the-envelope calculations were shown to be faulty in several key ways, but Google’s quantum boasts, Mayo-Smith’s post, and IBM’s announcement at CES 2020 that it has achieved several quantum milestones of its own have triggered a flurry of hand wringing about the viability of crypto in the not-too-distant quantum era.

Most experts believe encryption-busting quantum computers are still many years out, but even the skeptics are hedging their bets, noting that quantum computers could freeze the Bitcoin network, threaten each and every quantum system, and even break pretty much all encryption-dependent technologies, with all of this very possibly occurring much sooner than we all think.

Add it all up, and these four challenges should keep legitimate financial institutions and retailers on the crypto sidelines, as cryptocurrencies either struggle through growing pains in 2020 before reaching maturity, or they crash and burn, becoming just another failed attempt to challenge fiat currencies.


Tags: , , ,