CoinMetro is a cryptocurrency exchange that aims to make buying and selling cryptocurrency as easy as purchasing pounds, dollars and euros.

Offering a complete and supportive financial platform, CoinMetro provides an avenue for both newcomers, as well as professional and experienced currency traders to begin trading in cryptocurrency. Through a tokenized ecosystem, the trading platform supports familiar investment options such as professional asset management and ETFs, and also allows users to invest in up-and-coming Initial Coin Offerings (ICOs).

The team behind the business has years of experience in the forex industry, with CoinMetro’s sister company FXPIG. Drawing on their substantial experience developing technology for financial trading and understanding of the liquidity needs of currency markets, CoinMetro is uniquely positioned to support and understand the needs of the growing cryptocurrency space, as well as support the trading needs of investors wanting to add crypto to a diverse portfolio of new and traditional securities. To discuss all things forex and crypto, we caught up with the CEO of the company Kevin Murcko.

As a long-standing expert in forex and crypto, what would you say are the reasons behind, and the impact of Bitcoin’s price volatility?

With a relatively small circulation of coins, prices of cryptocurrencies are often affected by the actions of ‘whales’ – early investors with large stakes in specific markets. News is also a force to be reckoned with. News of countries enforcing bans of course plays out bearishly in the markets, while news of government endorsement predictably sends prices upward. Lack of regulation has also contributed to instability.

The impact of volatility has been twofold. On the one hand, rapid price fluctuations have made the space a profitable one for eagle-eyed traders. In order for anyone to make money in financial markets, there must be price movement, and the crypto markets have offered traders exactly that.

On the other hand, with a larger price bracket, comes larger levels of risk: sizeable gains on one day can be all but wiped out in the following day of trading.

Of course, a currency should ideally hold its value and be a reasonably reliable store of wealth. In this sense, extreme volatility has also tarnished the reputation of cryptocurrency as a traditional currency, and resultantly, countries are increasingly choosing to regulate crypto as an asset.

But it’s important to note that while cryptocurrencies have been volatile assets in the past, this doesn’t mean that this will always be the case in the future. In fact, some cryptocurrency developers are taking active measures to limit volatility by, for example, pegging the price of their token to that of the US dollar.

Can you tell us a bit about the history of forex regulations?  How have they affected the marketplace?

The history of FX regulation really depends on which country you’re looking at. All countries have their own independent regulatory bodies, and are typically subject to different rules.

China, for example, was late to enter the foreign exchange market and late to impose regulations. As recently as August 2016, Chinese authorities found 192 illegal banks conducting shady forex transactions valued at $30 billion. The State Administration of Foreign Exchange (SAFE) also found instances of companies evading regulations by using false information, transferring illegal assets, and evidence of money laundering via forex trading schemes.

Globally, of course, there are regulations with global ramifications. MIFID II, for instance, has caused an upheaval in FX markets this year.

The net effect of all this regulation has been to achieve what I suppose is the goal of all regulation: it’s helped the FX markets to thrive and maintained financial stability.

What can be learnt from the introduction of regulations in the forex industry?

By reflecting on how the forex industry has been shaped by regulation over the last 20 years, we can get a rough idea of how everything might play out for a decentralised international cryptocurrency marketplace.

Before Bitcoin and alternative cryptocurrencies were established in the late 2000s, the forex industry was facing radical change as the internet opened up the market to the public. New retail brokers started to appear alongside the traditional banks, providing new services and competition. As forex trading made the move online, there was an element of the ‘wild west’ culture that has also characterised the early stages of cryptocurrency. As both markets have experienced a similar introduction to the trading space, the future development of regulations for cryptocurrencies will mirror that of forex trading 10 years ago.

The current conditions in FX enforce businesses to jump through a variety of hoops - such as meeting minimum capital requirements, establishing audit requirements, and adhering to reporting and bookkeeping - before becoming a licensed forex broker. Thanks to this detailed process, regulators are able to weed out fraudulent brokers before they get to market. We expect equivalent hoops to be introduced into the cryptocurrency space. This is all likely to happen quickly, given that cryptocurrencies are now very much a mainstream financial asset.

Like the historic forex market, there’s a certain pull and push in the crypto world between the need for overt regulation and control, versus a laissez-faire approach in which a free market is allowed to regulate itself. In the case of crypto, I expect the regulated approach will win out.

Why does the crypto community need to adopt wider regulation and become part of the regulatory process?

Regulation, if done correctly, legitimises the cryptocurrency market by removing that ‘wild west’ element to it – the very same which once characterised the forex markets.

Regulation brings stability to a market often regarded as excessively volatile, and protects investors from criminal activity; given just how many fraudulent Initial Coin Offerings, cryptocurrency hacks, and fraudulent exchanges are about, this is long overdue.

Why does the crypto community need to be part of this process? For the simple reason that, if left in the hands of potentially misguided legislators, regulation could undermine the growth of this booming part of the financial services sector.

We’ve seen just how awry crypto regulation can get. Chinese policy for example, has achieved little other than to quash innovation and growth, and has simply driven cryptocurrency activities abroad.

What do you think the rest of 2018 holds for forex and crypto?

We have a rough idea of what this year holds for crypto, following on from the recent G20 meeting of finance ministers in Buenos Aires. Member nations have agreed that cryptocurrencies needed to be examined, but that more information is needed before any regulations could be proposed. While there will be further details on this in July, we do have some signs about what recommendations will be announced. Expect

- A bilateral approach to regulation, as Christine Lagarde has recommended on numerous occasions this year;

- Crypto to be treated as an asset, and not as a currency, as various financial regulators have hinted at throughout the year;

- Crypto regulation to ultimately consist of a mixture of existing rules and new rules.

Forex is more difficult to pin down at the moment, with US protectionism on the rise and the prospect of a trade war. This year, the Euro looks bearish, with the dollar’s value as the reserve currency of choice diminishing in step with uncertainty over US trade policy. Whether this will persist to the end of the year remains to be seen.

Website: www.coinmetro.com

By Kevin Murcko, CEO, CoinMetro and FXPIG

The digital asset economy has seen extraordinary growth over the course of the last year, as seen by the success of Bitcoin. Such rampant activity means that people will often forget that this economy is still developing. Regulations are yet to be imposed on the cryptocurrency market and it remains unknown how it will be affected when countries and governments decide to implement legislation. However, the recent history of the foreign exchange (forex) offers us a look at what the future might hold for the developing digital asset economy.

Forex trading occurs electronically, and is based on a decentralised market that is accessible globally. Despite differences in mechanisms and technology, this is not dissimilar from the decentralised and international structure of the cryptocurrency market. With this in mind, it is not unreasonable to believe that cryptocurrencies will follow the path already trodden by forex when it comes to regulation in future.

In the beginning…

Before Bitcoin and alternative cryptocurrencies were established in the late 2000s, the forex industry was facing radical change as the internet opened up the market to the public. New retail brokers started to appear alongside the traditional banks, providing new services and competition. As forex trading made the move online, there was an element of the “Wild West” culture that has also characterised the early stages of cryptocurrency. As both markets have experienced a similar introduction to the trading space, the future development of regulations for cryptocurrencies will mirror that of forex trading 10 years ago.

Forex regulation evolves

Traders now operate in a vastly different way, compared to in the past. Thanks to regulatory developments in the established forex space over the last 12 years, the current markets are built around protecting individual investors and market stability. The current conditions enforce businesses to jump through a variety of hoops - such as meeting minimum capital requirements, establishing audit requirements, and adhering to reporting and bookkeeping - before becoming a licensed forex broker. Thanks to this detailed process, regulators are able to weed out fraudulent brokers before they get to market.

On a national scale, individual financial institutions have their own measures for forex regulation as well, to further protect customers and prevent market abuse. For example, in Australia, the Australian Securities and Investments Commission (ASIC) brought in new regulations in 2009, which imposed new restrictions on over-the-counter (OTC) derivatives trading. This then provided the basis for other countries to reform their own forex regulations regarding OTC trading.

Australia is particularly careful when it comes to regulations, having felt the repercussions of deregulation in the 80s and 90s. The Australian regulatory environment is considered to be one of the most robust and effective in the world. There, modern forex brokers are required to maintain an ASIC license, which demands they hold, “at least the sum of $50,000; plus five per cent of adjusted liabilities between $1 million and $100 million; plus 0.5 per cent of adjusted liabilities for any amount of adjusted liabilities exceeding $100 million.”

Like Australia, Japan has implemented minimum capital requirements as part of its licensing framework for forex brokers. In fact, since first making an amendment to include forex in the Financial Futures Trading Act in 2005, the Japanese Financial Services Agency (FSA) has updated it policies on a number of occasions. In 2007, it found issues with highly leveraged transactions, which required increased regulation on the margin requirement ratio of some transactions. More recently, in 2016, Japanese regulators decided to update margin requirement policy again, but included it for all types of forex transaction.

How the past will affect the future of cryptocurrency

The past year has seen cryptocurrencies shoot into the mainstream, consolidating their status as a new asset class. However, with this growth in adoption, the prospect of regulation for the digital asset economy has become a more pressing issue. As the regulatory landscape for cryptocurrencies is far from established, investors are currently waiting to see the impact regulation will have on the market, as one nation’s implementation of regulation may have a bigger impact on the market, and on a global scale.

Despite many people in the crypto community being staunchly against regulations being introduced, governments and institutions are already looking at how they might implement new regulation on digital assets, and previous experiences with developing forex regulation are playing a strong role in this. However, imposed regulation may not necessarily be a bad thing for the digital asset economy. New regulations would mean people would feel safer investing in cryptocurrencies, as fraudulent brokers will be excluded from the market, which should then serve to drive increased adoption of cryptocurrencies in future. This would legitimise digital assets such as Bitcoin, and prove that these blockchain-based currencies could be the future of currency.

Of course, it is impossible to precisely predict what the exact impact of regulation will be on the digital asset economy, but by taking a look back at how the forex industry has been shaped by regulation over the last 20 years, then we can get a rough idea of how everything might play out for a decentralised international cryptocurrency marketplace.