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Winds of Change in Crypto: How is the Regulatory Crackdown Affecting the Markets?

Empirical evidence suggests that the failure of industry leaders in any sector will give rise to newcomers that could potentially disrupt established markets. A classic example is how Apple, Inc. (disrupted the global smartphone market more than a decade ago when cornerstone giants such as Nokia Oyj (NOK) and BlackBerry Limited failed to address the growing demands of customers. A similar phenomenon may be about to happen in the digital assets landscape today with the failure of the leading crypto platforms in the world such as Binance and Coinbase to recognize the importance of regulation for the future survival of the crypto world. This may pave the way for newcomers like The INX Digital Company, Inc. (INXD.NE) (INXDF) to grab the market share of the crypto trading market. Investors are likely paying close attention to this exciting development of a potential inflection point in the market, alongside the opportunity to potentially benefit from the demand it creates.


The changing regulatory landscape

Over the past two years, many leading crypto platforms have attracted regulatory scrutiny for alleged violations of securities laws., Binance, the largest crypto platform in the world, is grappling with SEC allegations that it operated as an unregistered broker and exchange while Coinbase, the largest crypto platform in the United States, is facing a similar lawsuit where the company is accused of trading unregistered securities.

Many other platforms have also come under pressure, with KuCoin, a Hong-Kong-based exchange, being charged for unlawfully operating in the U.S. and Kraken being ordered to discontinue its staking business. After years of exponential growth in crypto adoption, regulators are actively involved in making global cryptocurrency markets a safer, regulated space that promotes the healthy growth of digital assets. From a long-term perspective, this regulatory crackdown may become a positive development as increased market transparency and proper regulation is likely to finally attract significant sidelines-resident retail and institutional investors to investments in crypto digital assets.

Which Company is Benefiting from the Current Environment?

INX, since its inception in 2018, has been laser-focused on offering only regulated crypto products for the investment community. The company’s business strategy is centered around the premise that existing market leaders will one day come under regulatory scrutiny. What to many seemed like a far-fetched idiom at the time, has become a rapidly unfolding reality, creating a unique opportunity for the company to execute on its business strategy. INX’s addressable market has expanded dramatically due to the recent regulatory struggles faced by today’s market leaders, and investors have not remained oblivious. INX’s ~150% increase in market value this year (so far) may signal the initial symptom this newfound awareness of crypto’s legacy challenges and be the start of a new wave that will swiftly shakeup the crypto industry.

INX’s products include a regulated cryptocurrency trading platform, but the main highlight is its Securities Token business. While many newcomers to this sector are trying to disrupt the crowded crypto trading market, INX has taken a unique approach by focusing on security digital assets which may offer a replacement for traditional equity markets by companies seeking to raise capital in innovative ways with novel potential financial benefits for both retail and institutional investors. In 2021, INX became the first company to showcase an SEC-registered token IPO. INX’s main focus is to disrupt the way capital markets operate currently by offering SEC-registered investment contracts that represent ownership stakes of more than just equities of companies. This new way of addressing securities opens the door for a myriad of financial products that are challenging or impossible to achieve in classic equity markets such as fractional ownership, IP-only capital raises, and almost unlimited cross-border capital opportunities.

Recent announcements and Potential M&A

Regulators’ recent actions leave no doubt about the future of digital assets – market participants that fail to embrace regulations are likely to fall behind. INX, as one of the few crypto businesses with deep roots in offering regulated products, stands to potentially benefit more than others from this new development. This realization has already caught the attention of bigger market players. Republic is considering a $120 million deal to acquire INX Digital, and the two parties have signed a non-binding agreement to progress with discussions for a deal. Given the increase in stock price and the increasing looming regulatory threats, it seems only possible that Republic may not be the only major crypto player to be interested in owning INX, that may be positioned as the key or shortcut to regulating their operation. As such, the company’s perceived value is potentially well positioned to increase in the coming months as multiple crypto giants may turn to INX as a potential acquisition target.

Recent Performance
Looking at INX in comparison to major players in the crypto world like CoinBase, SoFi and Robinhood, the market seems to have been rewarding them the last few months, as the value of having regulated platforms becomes increasingly clear.



Conclusion


The changing crypto regulatory landscape has tilted the odds in favor of companies such as INX, that prioritize regulatory compliance while offering innovative products for regulation-only investors to gain exposure to digital assets. The company is still in the very early stages of its growth story but its unique regulatory achievements with the SEC have already attracted the interest of key players in the industry that may use INX licenses to traverse the complex regulatory requirements that are not going away.

This content above is not financial advice nor should it be used as such.

 

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