As the tech industry shifts from Web2 to decentralised Web3 where data is owned by individuals, people will have more freedom to choose where they belong.
The decentralised internet of the future will be run by and for communities.
Since the recent crypto crash of many known entities (Terra/Luna, Celsius, Voyageur, FTX, etc.), we must look into how thriving crypto projects can rebuild. These crashes have highlighted, once more, the importance of strong foundations and integrity. We learned that in a world full of jumpy rabbits, it pays to be a sturdy swiss turtle. Greed and avarice always come at a price and so the market is in the process of healing.
Cryptocurrency is no stranger to boom and bust cycles. In this bear market, both high inflation and Federal interest rate hikes have led to stock and crypto markets taking the hit as they are both risk assets.
There is, it seems, a consensus that the current bear market is a good time to build stronger products. The FTX crash and its fallout are stress tests in the crypto space. As innovators raised in an open-source culture, we especially welcome tests about transparency.
Many seem to agree that regulation may be a way to minimise a recurrence of many of the issues that have brought down several crypto players in recent times. For example, The European Council (consisting of EU national government representatives), Parliament and Commission agreed on the “Markets in Crypto-Assets Regulation” (MiCAR).
In the UAE, the Regulation of Virtual Assets and Dubai Virtual Assets Regulatory Authority was formed in April 2022 and Abu Dhabi launched the Crypto Hub in November.
Experts are also pointing out that true decentralised finance (Defi) projects have not had the same issues as the centralised finance (Cefi) projects which have collapsed. Defi, which aims to redefine traditional financial products without middlemen and decentralised autonomous organisations (DAOs), which could soon be a new internet community, is poised to be the highest growth area of crypto.
As of the start of November 2022, the total value locked in Defi protocols was approximately $56bn, representing a 141 per cent CAGR over the last two years. In a world of instant gratification and services, there is a crying need for a financial system that can match its transaction pace to the one at which the information is exchanged. With that regard, Defi will play an integral role.
Finally, the next wave of adoption of cryptos will certainly come from a better equilibrium in the investment between utility tokens — where there is sometimes a lack of understanding about the project and the technology — towards security tokens or other tokenised assets.
We anticipate that security tokenisation will propel more financial institutions to tokenise off-chain assets. For example, the real estate market can benefit tremendously from asset tokenisation. Imagine a world where a flat can be tokenised, someone would be able to purchase a portion of the flat they are currently renting (10 per cent for example) while paying the rent for the remaining.
It will help to reduce the risk for banks and maximise the business turnover with more loans given. Today the process is super binary, you either rent your flat or own your flat. To own your flat, if you don’t have the cash, the bank will review your financial profile and will approve or deny your loan request.
In a world where real estate is tokenised, instead of a binary “yes” or “no”, the bank will tell you that they can loan you a fraction of the flat value (for eg. 43 per cent) that you can become a fractional owner of. In a world of an ever-inflated real estate price, it will become very welcome.
For crypto in 2023, we predict that there will be a harder push towards regulating the space. And, if so, there is also an emerging debate on how regulated crypto exchanges (CEX) can move forward in the space, such as how many crypto projects will actually survive in the next five years.
How many of these projects will have enough liquidity in the next five years? Will there be a massive adoption towards security tokens/tokenised assets on CEX? Many players have already capitalised on this trend.
To this, future doors across the world need to open, as ours is. As a CEX, we want to foster a sense of belonging for anyone who wants to take ownership of their wealth and help build the future of finance.
Though the noise about crypto is high, it is an essential long-term investment and is the building block towards a cashless and highly digitalised society, offering the opportunity to scale the exchange of value with the velocity at which information is exchanged today and building the society of the future.
Anthony Lesoismier is the co-founder and chief strategy officer at SwissBorg