As Coronavirus Rages, Bitcoin Heads in the Direction of the Mainstream
People invested in Bitcoin have been watching the market plummet in recent weeks. Bitcoin is the recognized cryptocurrency. As such, other cryptocurrencies watch the price carefully. The price has dropped dramatically. In mid-February, the price hovered around $10,000 USD. In mid-March, the price dropped briefly to below $4,000 USD. Although the price has recovered somewhat, there are doomsayers that have been wondering aloud if Bitcoin will spiral back to pre coronavirus prices.
Adding to the gloom is the stock market. Stock markets have somewhat mimicked the shift in Bitcoin prices. Initially, investors panicked as the virus became a significant issue. The same investors were somewhat reassured when the US Government announced a $2 trillion USD stimulus package aimed at reactivating an otherwise sluggish economy. This move by the government cast considerable doubt on the belief that cryptocurrency assets would act as a safe haven during this period of uncertainty. It was commonly thought that cryptocurrencies would buck the trend by moving in the opposite direction to the market as a whole. For many advocates of cryptocurrency, this was the main attraction of investing.
Countries Beginning to Recognize Cryptocurrency
While this has been happening, another more encouraging trend is attracting less attention than it should. In the past, countries have either banned cryptocurrency outright or refused to acknowledge them as money. These same countries are now beginning to recognize them. This fact could well mark an important milestone as digital currencies move in the direction of the mainstream.
This shift in sentiment has been motivated by new global standards for counter-terrorism and anti-money laundering efforts. The Financial Actions Task Force (FATF) has set these standards. Until recently, an anti-money laundering framework for cryptocurrency transactions did not exist. It is for this reason that many counties did not recognize them.
Bitcoin Now in the Same Bracket as Currency
In late March, a court in France ruled that loans involving Bitcoin were indeed, a consumer loan. This ruling instantly put Bitcoin in the same bracket as currency for the first time. This move was instrumental in reassuring individuals that they are guaranteed equal protection under existing law.
Shortly after the ruling in France become public knowledge, Germany, South Korea, and Abu Dhabi followed suit. Having banned cryptocurrencies in the past, these same countries now have exchanges open real-name bank accounts with authorized banks. This move should reassure investors that cryptocurrency can be used safely. Since that time, India and Zimbabwe have reversed their ban.
These forward-thinking economies made their move ahead of the June deadline to align themselves with FATF standards. Globally, 37 countries are members of FATF, including the United States and the United Kingdom. All these countries, plus more, are expected to signal their intention of following the same rules in the coming months.
There is little doubt that Bitcoin investors have incurred substantial losses in the last month or two. With the adoption of this new asset class, the status of Bitcoin looks increasingly assured. The new rules do more than simply clarify the status of firms providing cryptocurrency services. The rules make it much easier to transact directly with banks and others.
COVID-19 has thrown the world into turmoil. This fact does not look as if it will have a significant effect on cryptocurrencies. In fact, as more countries move to accept cryptocurrencies, assets may very well become entrenched in the financial mainstream.