Articles

Is it Safe for Corporations to invest in Crypto Assets?

by Everspark Interactive Law Firm SEO

 

Investment returns are as important for a business as operating income. And when it comes to investment and institutional investment, it’s all about high yields. Crypto-related assets have become synonymous with high yields. According to coin telegraph, Bitcoin was the best performing asset of the last decade by 1000%. Small caps like Solana have given humongous returns.


Legalities involving crypto-assets

 

Nowadays, it’s normal for corporations to acquire crypto-related assets. Institutional and retail buying has soared for these assets. There is a wide variety of crypto-related assets. From ICOs to non-fungible tokens to play to earn currencies, there’s a lot going on in the crypto world. However, one major hurdle for this ecosystem is regulation. 


Cryptocurrency has still not been properly regulated. In fact, in some countries, it’s banned or declared illegal. Along with the massive upside it has, there is the significance that comes along with investing in crypto-related assets. The best course of action in this situation is to consult the professional Securities Litigation Attorney.


Regulation and cryptocurrencies 

At the moment, there is no perfect system for regulation for cryptocurrencies. Bills and drafts are being passed frequently in the US senate and assembly to regulate crypto-related assets. Massive volumes are being traded in the crypto-market daily. The market activity of this level cannot simply be ignored by the SEC. Lately, it has been looking more into the matter. 


As the adoption rises, so does the need for governance. SEC has now been ordering compliance and conducting reviews from investment advisers related to crypto-assets.


Concerns regarding crypto-assets

The following concerns have been rising related to crypto-assets and crypto-related investments. These are factors that a business should look at while considering an investment in crypto-related assets.


#1: Valuation of crypto assets 

The price of the token or cryptocurrency is thought of as its face value. But that isn’t the case. Valuation is simply the result of the supply of tokens and the total value locked in that protocol. Nowadays, there are non-fungible tokens also being traded. Several individuals and institutions have churned in big profits from NFTs. However, this valuation is a bit tricky since they can go up to millions and have no apparent on-chain uses. 


Due to all this confusion, SEC has called up for the valuation basis of crypto-related assets from concerned organizations. One should do proper research before investing in a crypto-related asset.


#2: Disclosures and public information at the time of ICOs

Companies offer IPOs when they go public. Same as that, crypto protocols offer ICO (initial coin offerings). This is when the coins are initially launched. Before the ICO companies upload their whitepapers on the internet, this white paper is the introduction to the mission of the projects and technology. It shows how the mechanisms of the project will work along with the relevant statistics. 


Reading a white paper is not as easy since it contains technical and legal details. If a business decides to invest in crypto-related assets, the white paper of the technology should be invested. Consulting the right Investment Management & Securities Group can be beneficial regarding this matter.


#3: How are crypto assets stored? 

Crypto-related assets are traded on exchanges. Now the exchanges can be of two types. There are centralized and decentralized exchanges. Central exchanges do the KYC and are more transparent than decentralized exchanges. Each of these exchanges has wallets. Cryptocurrency wallets are like bank accounts where your holdings are stored. 


Other crypto wallets that are not owned by the exchange but can be linked to one also exist. Examples of these are trust wallets. Physical wallets, which are in the form of USB, are known as hardware wallets. Businesses need to give thought to this and the safety of these wallets at the time of investing. 


#4: Transparency of decentralized finance

Just like earning annual interest on your savings account, APY can be earned on holding crypto-assets. Decentralized finance is being thought of as replacing the current monitoring system. 


However, the transparency and safety of de-fi are still questionable. There have been on-chain attacks where significant crypto-amounts have been wiped off. The highly fluctuating APY is also a factor that needs to be constantly monitored. 


#5: Stable coins

Stable coins are digital assets that are pegged to traditional currencies like the dollar. These are issued by non-governmental organizations and are not yet regulated. According to the American banker, the capitalization of the stable coin market was about $130 billion. 


The redemption of stable coins into traditional currency is one of the biggest doubts amongst regulators. Stable coin issuers like tether have been repeatedly critiqued and questioned on their mechanisms.

 

Final Verdict:

Investing in new promising technology can do wonders. With so much going on in the crypto world, it can be hard to keep track. Researching and understanding the markets and protocols for legalities can be extremely challenging. However, one must ascertain the amount of risk tolerable. If being risk-prone, then a proper strategy should be devised. Get in touch with the Securities Litigation Attorney today to make great returns with a market-compatible strategy. You can also schedule a consultation with an expert from Investment Management & Securities Group by calling 888-591-6916.

 






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Created on Jun 15th 2022 12:24. Viewed 258 times.

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