Although impressive development has taken place across the blockchain space during the past few years, the ability to purchase crypto with fiat remains challenging. Despite growing interest from the public, purchase options are limited, as the process tends to be long, inconvenient, and expensive. More fiat onramps are opening, but regulatory hurdles continue to be a major obstacle to their progress.
Although every nation has unique finance and banking rules, almost all require businesses that deal with handling and moving money to follow know-your-customer and anti-money laundering regulations. In the United States, for example, financial institutions must acquire a money transmission license from both the federal government and from any state where they operate. Acquiring such licenses is, not surprisingly, both tedious and expensive as is maintaining compliance with the myriad of regulations that come with them.
This difficult process is made even more challenging for cryptocurrency exchanges, as most nations have yet to fully define the legal and regulatory status of blockchain assets. This lack of clarity results in exchanges facing significant scrutiny from lawmakers because of the controversial and often misunderstood nature of the crypto space. There are also a number of states that have attempted to block fiat-based exchanges altogether, such as India, which presently prohibits banks from involvement in crypto activity.
Despite current obstacles, the tremendous profit potential means that the number of fiat-to-crypto exchanges is all but certain to grow in the coming months and years. Coinbase, for example, is believed to have made USD $78 million in the first quarter of this year, and over $500 million in 2018. Not surprisingly, other established exchanges, such as Poloniex, Bittrex, and Binance have now moved into the fiat market and many new ones, such as Voyager, are entering it as well.
The overall growth in the blockchain space is putting pressure on regulatory bodies to make purchasing crypto easier, the results of which are mixed. A few U.S. states, such as Pennsylvania, have loosened licensing requirements for fiat exchanges. Some nations, such as Switzerland and Malta, are also taking steps to become more crypto-friendly. Nevertheless, most governments remain wary of embracing the radical level of change that will come with the crypto revolution, and thus are reluctant to make any moves in that direction.
For their part, existing financial institutions are increasingly interested in offering crypto services, which will soon place them in direct competition with existing exchanges. Crypto custodial services, such as Bakkt, as well as exchange traded funds (ETFs) and other investment vehicles are expected to soon be commonplace. There is thus no question that the authorities that govern the global financial system will soon be forced to take the blockchain revolution more seriously, and begin making the legal reforms necessary to legitimize crypto assets.
For crypto advocates, the good news is that the number of fiat onramps is growing, yet much more growth is needed. Also, lawmakers and regulators are gradually accepting the fact that this new asset class cannot be regulated in the traditional sense. Nevertheless, challenges and obstacles for those wishing to purchase cryptocurrencies are likely to be commonplace for the near future.