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The cryptocurrency market is maturing, not stalling

With the aggregate cryptocurrency market cap soaring above $150 billion, an above-800% increase in the first eight months of this year, parties that previously dismissed digital currencies as a niche market are starting to make their mark. Governments and financial institutions, which were previously observers, are now taking a more active role in the development of token sales and the trading of digital currencies.

Some analysts and speculators are interpreting these developments as the glimmers of the cryptocurrency bubble preparing to burst. However, some interesting developments are indicative that the landscape might in fact be evolving into a more stabilized market. While stricter regulation might put a plug into the hype surrounding cryptocurrencies, it will also help bring order to the chaotic landscape of cryptocurrencies. In tandem, startups and projects are emerging to help the market adapt to the new rules.

Crypto exchanges mature

The first cryptocurrency exchanges emerged a couple of years after the advent of Bitcoin, enabling users to trade in crypto and fiat currencies. But with the growth of the market, their shortcomings have become evident, including caps on fiat transactions, security failures, possibility for unfair practices and lack of transparency.

China might be issuing a ban on cryptocurrency exchanges soon. Though the motive has not been clearly stated, it could very well be due to the financial risks that these increasingly valuable digital currencies entail. With large investors becoming more involved in the cryptocurreny market, the need to overcome the limitations of cryptocurrency exchanges has become an imperative. Legolas, a new cryptocurrency exchange, aims to address these issues through a hybrid approach.

Legolas employs the power of blockchain, the technology that powers Bitcoin, Ethereum and other cryptrocurrencies, to store order placements in a decentralized, transparent and immutable way. To launch and support the platform, Legolas has partnered with Luxembourg-based BankQix Bank. Thanks to the partnership with an established financial institution, users of Legolas will be able to safely and securely deposit, withdraw and convert large sums of both fiat and crypto currencies.

All operations are stored on the Bitcoin blockchain, making the process auditable and verifiable. Meanwhile, Legolas’s parallel blockchain-based hash log protects customers from front running by preventing the platform managers from from inserting orders in front of customers’ trade instructions.

ICOs gets a dose of regulation

Initial coin offerings (ICO), also known as token sales, the innovative way to raise funds on the blockchain, have enabled startups to net billions of dollars since the beginning of the year. However, there are many reasons to be wary of ICOs, including their unregulated nature and the lack of clarity that some projects contain. They’ve been subject to many scams, with token issuers simply copying whitepapers of successful projects and leaving investors and enthusiasts drained of their funds and dreams.

In July, the U.S. Security and Exchange Commission (SEC) signaled that laws may apply to ICOs, and in August warned against ICO scams. The sentiment has been echoed by Financial Industry Regulatory Authority (FINRA) and the Russian Central Bank. China banned the practice altogether this month.

While the regulatory measures will likely slow down the hype surrounding ICOs, it will also help filter the scam and make the general landscape more reliable and safer for investors. Meanwhile, a number of projects and startups have emerged that are helping level the terrain for both investors and token issuers.

One of these companies is Iconomi, a blockchain-based investment vehicle that manages the risks involved in investing in digital assets and currencies. Iconomi enables the creation of Digital Asset Arrays (DAA), the crypto equivalent of Exchange Traded Funds (ETF). DAAs are digital tokens that represent diversified bundles of crypto-assets. This can be digital currencies such as Bitcoin, Ethereum and Monero, as well as project-specific tokens such as Augur and Golem.

Iconomi is especially suitable for enthusiasts who see potential growth in the crypto-currency world, but want to protect their investments from its volatilities. By purchasing DAAs instead of acquiring specific tokens, they’re deferring the management of funds to portfolio managers, who are well versed in the laws and dynamics that govern the landscape and continuously adjust the array to secure gains and protect against losses.

Anyone can manage portfolios by creating an account on the platform. With everything being transparently and verifiably stored on the blockchain, array managers can gain reputation and more support by managing the portfolios successfully.

Blackmoon Financial Group, a financial technology and investment management company, is exploring a similar concept with Blackmoon Crypto (BMC), a blockchain platform for tokenized investment funds. BMC aims to make crypto investments legal and secure. The investment vehicle will bridge the gap between fiat and crypto currencies by creating a way for asset managers to create and manage legally compliant tokenized funds.

The jury is still out on how the cryptocurrency market will ultimately evolve. The market might be heading toward a hiatus, but what’s for sure is that digital currencies and tokens offer conveniences that weren’t available before, and they’re here to stay.

This post is part of our contributor series. The views expressed are the author's own and not necessarily shared by TNW.