Institutionalization: Good Or Bad For Blockchain And Cryptocurrency Industry
When blockchain was built in 2009, the pioneers could never have assumed that the technology would massively draw big corporations and governments as it is now. After all, blockchain was formed to eliminate such centralized authorities from intervening or controlling transactional information.
But what we observe today is an increasing number of global technology companies and governments frequently step up efforts to achieve blockchain or regulate it. Of course, this wasn’t the case at the start when blockchain was highly considered as a menace to the existing financial systems. As time goes on, though, more and more individuals and corporations have begun to believe that it has real potential.
Prominently, Facebook was so close to pulling a significant land-grab. They designed the launch of their Libra coin before a wave of criticism saw various key allies abandon the project. But that hasn’t prevented the company from pushing on with Libra. Even China, which was among the first countries to forbid cryptocurrencies, has lately changed its stance and is now actively examining the blockchain.
Blockchain Going Institutional
Why are these companies and state governments adopting blockchain now? First, it is essential to note that blockchain has moved beyond the hype cycle—the phase characterized by uncertainty among stakeholders about what profits blockchain brings to businesses compared to their existing processes.
The current period, where pilots and proofs of concepts (PoCs) are being examined and sometimes used, is named “blockchain-inspired,” according to Gartner. Many enterprises and governments are welcoming blockchain during this time to enhance their competitive edge against early adopters.
Nevertheless, to accomplish that goal, they are uniting forces. This involves teaming up with the institutions that define law, regulation, and capital flow in the industry.
The lens can see this of institutional investment, which flourished in the last year. Grayscale, a leading crypto investment fund, wrote that over $600m was funded in its portfolio of products in 2019, more than in the previous five years consolidated. A large part of those investments—71%—was sourced from institutional investors. That trend is expected to continue in 2020.
Engaging Policymakers and Regulators
Aside from investors, the growth of institutional interest in blockchain and cryptocurrency is also serviced by regulators and policymakers. Last year, we examined the Securities and Exchange Commission (SEC) actively implement the 2017 DAO Report. They were busy publishing various civil penalties against blockchain enterprises in the process.
Regulators have strived to preserve the public while not taking aggressive actions that could smother innovation in this area. Nevertheless, these improvements will never be acceptable. Many see every piece of regulation as an obstruction to building radical change.
Institutionalization of Blockchain and Industry
There is a developing consensus that blockchain would only reach mainstream if the industry is ready to adopt institutionalization. That is, hold the power of state and private organizations to build regulatory frameworks, accessible products, and capital flows that would give the foundations the industry needs to prosper. Except institutions are engaged, it won’t be feasible for the blockchain to accomplish their true potential.
So in truth, the institutionalization of blockchain would considerably help expedite its implementation over various industries. Reasonably that explains the reason why the first blockchain solutions today are from leading technology giants. This includes important organizations such as Microsoft, IBM, and Hyperledger.