Clear Digital Asset Rules Key To Unlocking Institutional Growth, Experts Say

At the Benzinga Future of Digital Assets conference, experts emphasized the critical role of regulatory clarity in shaping the digital asset market. The discussion shed light on existing barriers, such as SAB 121, and the broader implications of a shifting regulatory landscape for institutions and investors.

The Weight of Uncertainty

Panelists delved into how regulatory ambiguity has slowed institutional adoption of digital assets. Adam Guren, founder and CIO of Hunting Hill Global Capital, noted, “The uncertainty surrounding custody and compliance has kept many financial institutions on the sidelines. SAB 121 has been a major impediment.”

Guren added that a repeal or adjustment to SAB 121 could catalyze growth. “Institutions need a clear path forward. If regulations evolve, we could see a significant influx of institutional capital into the space,” he explained.

The lack of clarity has also created a fragmented market. John Divine of Blockfills observed that institutions currently face challenges accessing consistent market infrastructure. “We've seen some early moves toward progress, but until the rules are defined, many players will remain cautious,” he said.

Steps Toward Institutional Confidence

Recent developments offer hope, such as the Financial Accounting Standards Board's (FASB) approval of fair market value accounting for digital assets. Anthony Rousseau, head of brokerage solutions at TradeStation, described the rule change as a “critical step in encouraging companies to hold Bitcoin and other digital assets on their balance sheets.”

Rousseau noted that MicroStrategy's strategy of adding Bitcoin to its reserves has been a model for other businesses. “This approach demonstrates the long-term value of digital assets when supported by an appropriate compliance framework,” he said.

Global Competition and U.S. Leadership

While the U.S. grapples with regulatory ambiguity, other nations are swiftly establishing frameworks for digital assets. “We're seeing a race globally to provide regulatory certainty,” Guren said. “Once the U.S. steps up, it can set a global standard, but the delay is costing opportunities.”

Divine echoed this sentiment, adding that clearer guidelines would unleash innovation. “With a consistent regulatory framework, entrepreneurs can push boundaries, creating solutions that bridge traditional and digital finance,” he said.

From Barriers to Bridges

The panelists agreed that bridging the gap between traditional and digital finance hinges on regulatory clarity. Divine highlighted how blockchain is already challenging conventional models. “We're seeing technologies emerge that incentivize participation and reduce inefficiencies,” he explained.

Rousseau expanded on this, noting that more straightforward rules could facilitate the adoption of blockchain in everyday business operations. “Whether it's using blockchain for settlement or tokenizing traditional assets, the possibilities are vast if we remove the barriers,” he said.

A Path Forward

As the digital asset market matures, regulatory clarity remains the linchpin for growth. The panelists underscored that while the industry is ready for its next phase, the regulatory framework must evolve to support innovation without stifling progress.

This article focuses exclusively on regulatory clarity and its implications, providing a distinct angle from coverage of prior ETFs and trading strategies. By highlighting the interplay between regulations and market growth, it offers a unique perspective that complements the broader discussion at the event.

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Photo by Corynn Egreczky.