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06 September 2021

Lack of Regulation Limits Crypto Market

In the global economy, crypto currencies have been the talk of the town for some time now and, with the recent worldwide frenzy of digital currencies, the industry is now worth US$2tn, an enormous figure considering it has not even reached its maturity yet.

One major concern regarding crypto and decentralised finance is a lack of regulatory framework to oversee and safeguard retail investors. The large extent of speculation is something that cannot be ignored and worries most regulators around the world, compounded with the high volatility of the industry. It is another stark example of regulators’ limitations when it comes to new technologies which progress at rapid pace. The UK’s Financial Conduct Authority (FCA) has admitted it is not capable of properly supervising cryptocurrency exchange Binance as the firm does not have a formal headquarters and uses affiliates in different jurisdictions to access the conventional banking system, despite the significant risk that may be posed by the exchange’s products. As the industry continues to grow, companies such as Tesla may keep investing in the space, attempting to use it in their operations (although unsuccessful as of yet, it does indicate their intentions). If cryptocurrencies can iron out some major concerns it would come as no surprise that the decentralised finance industry could possibly expand beyond US$2tn in the coming years. However, the next big question that arises is how such a large industry can work without regulation while ensuring the safety of retail investors? Gary Gensler, Chairman of the US Security and Exchange Commission (SEC), suggested that cryptocurrencies and decentralised finance platforms should register under the SEC which defeats the purpose of decentralised Finance. It is yet to be seen what the future of crypto holds and how it will co-exist with the traditional financial structure.

Elsewhere, oil major Royal Dutch Shell has proposed a plan to install 50,000 on-street electric vehicle (EV) charging devices in the UK over the next four years. This attempt comes as the company steers towards the sustainable energy market and looks to benefit from the increased demand for electric vehicles. If Shell is given the green light it could make the company one of the leaders in the public charging market, capturing a third of it. Due to a lack of charging infrastructure and shortage of off-street parking, Shell emphasises on installing charging points in street infrastructure such as lamp posts or bollards, making it easier for drivers to charge their EVs. According to the Climate Change Committee, there is the required demand for 150,000 public charging points by 2025 for the UK to meet its target of net zero emissions by 2050, giving ample benefit to the various other companies to enter the charging market.

In Yorkshire, after a long period of struggle and uncertainty faced by the airline industry, particularly smaller airlines which were hard hit by COVID-19 restrictions, the lifting of restrictions earlier this summer means tourists can travel to a number of countries without the need to quarantine on arrival back in the UK. Jet2 has reported a positive financial contribution as flights are resumed with bookings deemed to be encouraging for 2022. Currently the company is flying to 32 green and amber destinations, representing about 55% of its pre-COVID summer 2019 capacity. The news comes days after Jet2 announced a deal to acquire up to 60 new Airbus aircraft to the value of £5.9bn.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
Lack of Regulation Limits Crypto Market
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