Aside from liquidity, what do institutions bring to crypto? What precisely is their value-added? This is an instructive question to ponder because there is little consensus on what deeper institutional participation means for an industry that is riven with contradictions.
The long-running wait for Bitcoin ETF approval, giving pensions and funds exposure to BTC, may well prove to be a positive catalyst for industry growth. However in focusing on price action, observers are missing out on the real benefit of broadscale institutional adoption. The greatest benefit of deepening institutional adoption may be the regulatory certainty it ushers in.
Tax and Compliance
There are a number of areas where institutional involvement is forcing regulators to give straight answers. Chief among these are taxation and compliance. What trades can a business legally make, how should they be disclosed on its balance sheet, and what steps must it take to report these activities?
Determining what constitutes a taxable event in crypto depends on your dominion. While U.S. traders are required to calculate profit and loss (PnL) on every trade on a decentralized exchange (DEX), perps position, and on-chain event, other countries take a less rigorous approach, while a few don’t bother to tax it at all.
The SEC is trying to show that they are not interested and attempting to push the dates until the final deadline, even though both the SEC and BlackRock know the inevitable outcome.
Seeking regulatory clarity
For those who already have skin in the game — sole traders, trading firms, family funds, venture capitalists — greater institutional involvement can only be a good thing. When the largest institutions decide they want in, it forces regulators to play ball. Not every provision that’s consequently pushed through the statute books will aid the industry — some will be asinine — but collectively they provide something that’s been missing for years: clarity.
Is Bitcoin a security? What about Ether (ETH) or Solana (SOL)? The answer, at present, depends on who you ask. Some agencies seem intent on declaring everything bar Bitcoin security; others take a more measured approach, focusing their enforcement efforts on the most egregious token sales and shills.
Institutions can’t trade assets that lie in regulatory no man’s land: they need black and white, not shades of gray. Their increasing participation in the market is bound to provide clearer answers in terms of crypto classification, which will benefit the entire industry.
Anticipating Upcoming Crypto Regulations Linked to Bitcoin ETFs,Anticipating Upcoming Crypto Regulations Linked to Bitcoin ETFs