It is not accurate to say that the industry has only experienced downsides throughout 2022
Having witnessed the multiple wins and breakthroughs in 2021, most crypto enthusiasts were brimming with confidence and optimism for the year ahead. However, 2022 was without a doubt a tumultuous and challenging year for the crypto industry — greeted with the dawn of the “crypto winter”, failed algorithmic “stablecoins” and the domino effect ensuing the series of implosions and bankruptcies in the industry.
Nonetheless, it is not accurate to say that the industry has only experienced downsides throughout the year. Globally, we got to see more mainstream adoption of crypto, and had a greater presence in celebrated sporting events such as The Super Bowl and FIFA World Cup Qatar 2022. Along with that also came more discussions and conversations about blockchain technology across the globe. From the lavish crypto events held across the various regions, to conferences amongst industry leaders and regulators, crypto’s prominence in the financial sector has progressively expanded in 2022.
What can we expect for 2023
The blockchain and crypto industry is currently still at its nascent stage with more untapped potential waiting to be explored. Despite the multiple industry upheavals over the past year, it is important to draw a distinction between human errors and technological flaws. The failures seen in 2022 did not occur from lapses in blockchain technology and were instead results of erroneous judgement and poor decision-making. As we usher into 2023, here are some key trends that we can expect to observe in this year.
Policy consensus for better regulatory environment
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View Details »In 2023, we can expect to see better refinement of global regulations and compliance on crypto. From the events of 2022, it is certain that greater regulation within the industry is inevitable, with “smart regulation” being essential for a safer custody of cryptocurrency.
Previously at the 2022 World Economic Forum’s annual Davos conference, Prime Minister Narendra Modi has called for global cooperation to address the challenges faced by the crypto industry. From December 1, 2022 to November 30, 2023, India will be taking on the G-20 presidency, the intergovernmental forum which involves some of the world’s largest economies, and one of the presidency’s main priorities is to build a consensus for policy approach to crypto assets. This opportunity sets the stage for India to play an eminent role in the formation of the policy consensus on crypto assets. We can also expect to see more studies being done to better inform the policy consensus.
Through the policy consensus, clearer frameworks can be drawn to establish better global regulation, including the implications of crypto assets on the economy, and the interplay between banking sectors and the blockchain industry. A clear and stable regulatory environment can support innovation and is essential to rebuilding trust in the industry and fostering long-term growth.
Greater mainstream adoption and rise in demand for Web3 talent
As regulatory frameworks become more transparent and institutional adoption of crypto becomes more extensive, mainstream adoption of blockchain will begin to gain momentum. This happens for a simple reason – the establishment of clear regulations in the industry has a positive correlation with building investor confidence and certainty when it comes to asset allocation.
According to a research report conducted by the Bank of America (BAC), there has been an acceleration in the adoption of blockchain technology with real-world applications. The decentralized nature of blockchain technology allows for a seamless and secure data storage system while removing the need for third-party dependencies. More companies and organizations across the different sectors are becoming interested in the technology, as well as the potential that it offers. In particular, there is a high demand for blockchain solutions in the banking, financial services and insurance (BSFI), e-Commerce and retail, healthcare and pharmaceutical sectors. Within the traditional finance space, 2022 saw players like J.P. Morgan executing the first ever cross-border fixed income transaction on a public blockchain, while Goldman Sachs announced that they were doing due diligence on numerous distressed crypto projects. The rise in institutional investors in crypto can bring about more use-cases for the asset and provide a positive change for the current landscape.
Concurrently, a wider crypto and blockchain adoption will also bring about an increase in demand for Web3 talents in 2023, which opens up more relevant job opportunities. Companies will begin to relook at their talent pool and explore hiring more talents equipped with blockchain and crypto expertise. India, which is the world’s second-most populous country, and home to more than 450 Web3 start-ups, takes up 11% of the global Web3 and crypto talent. This growth in Web3 is driven by the enormous pool of Gen Z and millennials professionals in the country, which makes up 77% of the population. With the current rate of mainstream adoption and demand for Web3 talent, this can help to further normalise the crypto landscape and result in greater acceptance among the general public.
Ramping up on innovation and education
When it comes to the outlook on the crypto market, most would agree that Bitcoin is a good indicator – given its position as the largest cryptocurrency by market capitalization. As the market descends into the “crypto winter” phase in 2022, we have witnessed the decline of Bitcoin and the value of the crypto market as a whole. As of today, it is certainly down from its 2021 heights, but total market capitalization of digital assets still stands at US$880bn which is more than double of its 2020 peak. However, across the history of Bitcoin and crypto, we have repeatedly witnessed the cycles of highs and lows in the market. Experts in the industry would know that the current lull period and macro uncertainties will not last indefinitely. Companies that have sufficient war chest and resources to tide through this phase will be able to prevail and set the narrative for its growth in 2023.
Despite the onslaught of negativity in the industry, technological developments and innovations have continued in the ecosystem. For one, Ethereum has finally completed its transition from Proof of Work to Proof of Stake amidst the current turbulent period. The transition will see a 99.9% reduction in the energy usage of Ethereum, setting the groundwork for more efficiencies in cost and processing speed. With the upcoming Shanghai upgrade, we expect withdrawals of staked tokens to become easier and more efficient which will in turn attract more capital into staking pools. As the technology progressively matures, more innovations will emerge to provide unprecedented value for investors and the society at large.
Closing the knowledge gap is essential when it comes to crypto and 2023 is a critical period to educate people and rebuild trust in the industry. We can expect more resources to be pumped into educating investors on responsible crypto investing and build greater understanding around blockchain technology and decentralised finance.
Moving on from 2022
As the crypto industry moves on from the headwinds and uncertainties that characterized 2022, greater transparency will be key for industry players and regulators. Alongside the establishment of clearer global regulations and legal compliance, organizations and regulators play an important role in reducing the knowledge gap for users and investors. Industry leaders and companies will also need to work on restoring users’ confidence in blockchain technology and the industry.
Current signs point towards a year of progressive growth and continued innovation in 2023. Effective communications on the value and innovation behind crypto will be essential in the sustenance of the industry. We’ve seen bitcoin network hash rates remain resilient throughout most of last year and with the next bitcoin halving expected to come in 2024, the least industry participants can do is to strive to better educate users on how the blockchain and distributed ledger technology works. Although the crypto space has seen a rough year in 2022, we can all be optimistic about the various industry breakthroughs and new use-cases that will come about in the year of 2023.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)Saturday, 14 Jan, 2023Experience Your Economic Times Newspaper, The Digital Way!Read Complete Print Edition »
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