Tag: crypto

14 Big Ideas for 2023: Crypto is here to stay

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Ark Invest is an investment management firm focused on innovative technologies and disruptive trends. In its 2023 report, Ark Invest outlines its views on the 14 sectors it believes will experience exponential growth in the coming years. The 14 big ideas, according to the report, are:

  1. Technological convergence

Multiple technologies interact with each other to bring exponential growth. The report states they are in five categories and will be worth $200 trillion by 2030. The tech that will converge are cryptocurrencies, artificial intelligence, genetic sequencing, robotics, and energy storage. The most significant part of those technologies is neural networks, also known as AI.

2. Artificial Intelligence/AI

This will increase productivity as workers rely on AI to help with repetitive tasks. Companies like Microsoft and Google could be big players in AI as they can access large amounts of data.

3. Digital consumers

People will spend more time online, assumingly consuming short-form content. Gaming will be more popular due to immersive gaming experiences. NFT will increase in popularity due to gaming.

4. Digital wallet

According to the report, 65% of the planet’s population will use digital wallets by 2030 compared to the 40% who use digital wallets today. The numbers started rising during the pandemic and are going up. Digital wallets enable direct payments by eliminating intermediaries. This will create high profits for digital wallet providers at the expense of traditional finance. Closed-loop transactions are already common in China and will be worldwide with time.

5. Public Blockchains/cryptocurrencies

The crypto Market has lost a significant percentage of its market cap due to calamities such as the collapse of FTX.

Three technological revolutions are driven by cryptocurrency; the money revolution, the financial revolution, and the internet revolution. The report predicts that the total market cap of cryptocurrency will be $25 trillion in 2030.

6. Bitcoin

The report’s authors predict that one BTC will be worth $1 million by 2030 if we go by the total crypto market cap predictions.

They also highlight that BTC’s fundamentals are better than ever, e.g., institutional investors’ adoption, etc.

7. Smart contracts

Smart contracts are the ideal alternative to all the centralized intermediaries in crypto that failed last year. It is hard for decentralization to work without smart contracts. Smart contracts act as a hedge in different activities such as DeFi, decentralized borrowing, lending, decentralized exchanges, etc.

8. Precision Therapies

Precision therapies are different as they are patient-centric and target the root cause of disease, not symptoms. This does not mean root causes like poor lifestyle but technologies like artificial intelligence, AI, DNA and RNA sequencing, CRISPR Gene editing, and laboratory automation. It involves giving recommendations that are specifically tailored to your genetics. The authors reveal that Gene editing is close to going mainstream.

9. Molecular cancer diagnostics

Early diagnosis means early treatment, which means a lower chance that people die from cancer.

Advances in molecular technology also mean you can test someone for cancer using non-invasive means. These advancements in testing will also make it easier to detect cancer recurrence. It could lead to 20% year-on-year profits for cancer-related Industries until 2030.

10. Electric Vehicles

The report suggests that supply constraints could make it hard for the EV market to grow beyond a certain point.

Global automakers have investment plans to introduce EVs. If petrol cars are outlawed, a disconnect in supply and demand could make the costs of producing Evs high.

So far, sales of EVS have been exponential compared to expectations.

11. Autonomous ride-hail or autonomous Transportation

In the report, statistics show that the cost of traveling one mile has stayed the same in 100 years when adjusted for inflation. The costs will finally come down with autonomous vehicles. It will be an excellent alternative for those who cannot afford EVs.

Autonomous taxis are already here, and their numbers are growing with time.

12. Autonomous Logistics

It means automated delivery. Drones and robots will increase in numbers making everything cheaper. Autonomous trucks will eventually become cheaper than trains for supply chain purposes.

13. Robotics and 3D printing

These industries could grow from 70 billion to over 9 trillion by 2030.

Amazon is leading when it comes to 3D printing. 3D printing will be used in every industry but is currently facing setbacks due to the cost of materials, a shortage of qualified personnel, and design issues.

14. Orbital Aerospace

It means all space-related technology. There are reusable rockets that will rapidly reduce space exploration costs, courtesy of companies like SpaceX.

Reusable rockets will also reduce the cost of sending satellites to space for global networks. The cost of space-based global networks will continue to fall, making the internet affordable for everyone. Reusable Rockets will make hypersonic flight more affordable.

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A Closer Look at the Crypto Regulation Proposed in the UK

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The UK is considering introducing crypto regulation with the aim of protecting its consumers and promoting the growth of its economy. As the country strives to become a leading hub in the crypto industry, regulation is deemed necessary. Incidents such as the collapse of FTX have highlighted the urgency of regulation in this area. A clear and transparent regulatory framework will reduce the risks associated with crypto investments for consumers. The proposed regulation is still in the consultation stage and is expected to be finalized by the end of April.

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Objectives of UK crypto regulation

The main policy objectives of doing the regulation include:

  • To encourage crypto regulation
  • Educate consumers about the risks associated with crypto investments
  • Preserve financial stability of the UK
  • Preserve market integrity of the UK

The proposed crypto regulations will be rolled out in two phases when they become law. Stablecoins will be addressed in the second phase, which will happen later in the year or early next year. At the moment, NFTs are not part of crypto regulation.

The UK has categorized crypto into different categories: Exchange cryptos, algorithmic tokens, governance tokens and fan tokens. Bitcoin and Ethereum fall under exchange tokens.

Initial governance method used

Crypto activities are currently not regulated by the Financial Conduct Authority (FCA). Decentralized finance makes it even harder to regulate, given its decentralized nature. Despite this, the UK introduced KYC and AML requirements for crypto exchanges in January 2020, requiring all exchanges to register with the FCA and subjecting violators to two years imprisonment. Many companies found the process lengthy and cumbersome, leading to some companies leaving the UK.

 Brief summary of the proposed  regulation

Crypto assets activities

They were the main target of the regulation. There is, however, one rule for all cryptos. This may be ridiculous as the crypto options are many. It would also be better if the regulation would be tailored according to risk. It is hard to tell the crypto activities occurring within Britain’s borders.

Crypto regulation will apply to crypto assets occurring within the UK. There is still the risk of UK citizens acquiring crypto from less regulated areas outside the UK.

As mentioned earlier, regulation of crypto assets will take place in two phases. The activities under phase two will include ICOs, crypto borrowing and lending, crypto custody services.

Decentralized coins such as Dai will not be subject to regulation. They will be treated as unbanked assets like BTC and ETH since they are unbanked. Dai may be affected since it is backed by USDC since it is a stablecoin requiring regulation. The UK is not planning to ban algorithmic stablecoins. Decentralized, algorithmic and NFTs are favored as the regulation only applies to cryptos not crypto coins and tokens. Regulations will come later.

Regulations related to new crypto

New crypto includes coins and tokens listed on exchanges and not necessarily creation of coins and tokens. According to the new requirements:

  • Investors are given accurate info
  • Investors are compensated if misled
  • Forging crypto offerings should be banned
  • Exchanges to do a due diligence on all cryptos they list and give detailed info to users
  • Exchanges act as issuers of crypto with no issuers such as BTC.

Cryptos already listed have not been addressed. It is unclear if they will be subject to the same disclosure rules.

 Regulations on Exchanges

Exchanges will be required to:

  • Be More liquid and be resilient
  • Be More transparent
  • Have Accurate on and off chain data

Exchanges will also need to do detailed data reporting, and establish a bankruptcy process.

Regulation on other crypto intermediaries such as market makers

They will need to address conflict of interest, sufficient liquidity, and detecting market manipulation. Generally, market makers have the same requirements as exchanges.

General market abuse requirements

In crypto there are many market abuse incidents that are not covered under financial regulation. The new regulation will control market abuse such as pump and dump schemes and market manipulation. Defaulters will face punitive action. The public will also be taught how to identify market manipulation.

Regulation of crypto borrowing and lending

Some exchanges such as FTX were using customer funds and illiquid tokens as collateral for loans because crypto lending and borrowing is not regulated. The new regulation will ensure risk disclosure, balance sheet disclosure, and clear user contracts.

Conclusion

The United Kingdom is currently undergoing the consultation phase for the proposed crypto regulation aimed at protecting consumers, boosting the economy, and maintaining the financial stability and market integrity of the country. The regulation will aim to educate consumers about the risks associated with crypto, provide accurate information to investors, and control market abuse. The new regulation will bring clarity to the crypto industry and enhance the UK’s position as a crypto hub. Overall, the proposed crypto regulation is a significant step forward for the UK in establishing a fair, transparent, and secure environment for the growth and development of the crypto industry.

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CENTRAL BANKS TO START HOLDING CRYPTO ON THEIR BALANCE SHEETS

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The Bank of International Settlements, BIS, recently released a report titled “ Prudential Treatment of Crypto Asset Exposure.” According to this report, the BIS, which essentially is the Central Bank for all Central banks, released guidelines and operating procedures on how Central Banks can own crypto assets on their portfolios. This comes as a surprise considering the BIS and Central Banks around the world have been increasingly vocal in their opposition towards decentralized cryptocurrencies and stablecoins. This article summarizes this report and lists some of the key highlights the report.

Details of the Report

The guidelines listed in the report are to be implemented by the 1st of January 2025. The report contains standards that will be used by Central Banks across the world to purchase crypto assets and include them on their balance sheets. It was drafted in close consultation with central bank Governors across the world. The aim of this report is two-fold: Firstly, to provide guidelines through which Central banks across the world can hold crypto assets. Secondly, the report aims to preserve financial stability across the globe.

Crypto Asset categories

According to the standard issued, crypto assets will be grouped into two categories: Group 1 and Group 2. Group 1 (a) crypto assets will include tokenized security assets such as stocks and bonds.Group 1 (b) will include centralized stablecoins. Group 2 (a) crypto assets include all decentralized cryptocurrencies as such ETH and BTC. For crypto to be considered as Group 2 (a) crypto, then it has to have a market cap of over $10 billion and a daily trading volume of over $ 50 MILLION. Group2 (b) crypto lumps together all other alt-coins

Before a central bank opts to purchase any crypto assets, there are additional requirements that should be met. Additionally, a rigorous risk test will be carried out to know whether to place a crypto asset in Group 1 or Group 2. Also, if an asset is placed as a group 2 asset, then there is a maximum exposure limit- the maximum amount that can be invested. This exposure limit is currently set at not more than 2% of the bank’s total capital.

Role of BIS in Crypto regulation.

The roles that BIS will play in implementing these new guidelines will be as follows:

· Monitoring the implementation of the standards stated in the report

· Make additional changes and improvements to the report

· Monitor central banks across the world as they implement these new standards.

Central banks will also be required to report to the BIS the crypto assets they are holding and consult with the BIS before classifying a crypto asset as either Group 1 or Group 2. Though not explicitly stated, this essentially means that the BIS will have a sole mandate on giving the go-ahead on whether a central bank can make purchases and how to grade the various crypto assets.

Conclusion

Industry insiders agree that this move may prove to be bullish for crypto assets and especially BTC as central banks have the capacity to provide immense liquidity to the crypto market. However, we also run the risk of centralizing some of these crypto assets as central banks have ‘limitless’ capital to buy large amounts of any particular asset and wield control over it. A good example of how Central banks may wield control over crypto is through the use of synthetic stable coins- basically, stablecoins that have been issued using the native currency of a given country. It is interesting to note that this report mentions nothing about CBDCs. It is assumed that the BIS know that some central banks may lack the technical capacity to implement CBDCs within their jurisdictions. Synthetic stablecoins seem to be a viable option at this stage. Having a huge stake in these stablecoins essentially means that Central banks can have a say in their performance.

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Blockchain, AI, and BNPL: Key Drivers of Fintech in 2023

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Fintech is still disrupting the financial industry. While there is still a lot of work to be done to streamline and mainstream this sector, there has been significant progress and growth in recent years. More companies and venture capital investments are aligning themselves with fintech, and major tech brands like Apple and Google have launched products in this space. As we move into 2023, here are three top trends that we believe will shape fintech:

Increased use of blockchain solutions: A recent survey by the Stellar Development Foundation and Wirex showed that there is an increased use of cryptocurrency solutions as a way of sending money across borders. The survey covered the US, the UK, Mexico, and Singapore, and found that in developed and emerging markets, cryptocurrency was increasingly used for remittances. More than half of the surveyed individuals felt that they paid too much to legacy remittance providers, while 37% said they did not know how much they paid in fees. Over 80% of surveyed consumers said they were aware of crypto payments, while 45% said they had already used it for remittance. In addition to cryptocurrency payment solutions, blockchain technology has a wide range of use cases in the fintech industry, such as decentralized finance (DeFi). Despite market downturns, the DeFi market cap currently stands at slightly over $38 billion, and more fintech companies are betting on the long-term growth of this industry. A good example is Creditum.io, a fintech company focused on providing fast and frictionless payment solutions, which recently acquired a license to operate as a fully-functional financial company and intends to launch products within the wider Defi ecosystem across Europe.

Artificial intelligence (AI): AI will be a key driver of fintech growth in 2023. Data shows that by 2026, the global market size for AI in fintech will reach over $26 billion, with a continuous annual growth rate of over 23% from 2021 to 2026. Fintech companies will use AI and machine learning (ML) for intelligent decision-making, powering chatbots, providing customer support, and fraud detection. This will make the customer onboarding process easier and increase efficiency within these fintech companies.

Increase in buy-now-pay-later (BNPL) solutions: The BNPL industry is thriving, with estimates showing that it will reach over $500 billion by 2026, up from around $120 billion in 2021. BNPL made up about 2% of global ecommerce in 2021, meaning that for every $100 spent, $2 was from BNPL. The significant growth in this sector can be attributed to the increasing number of merchants accepting these products, as well as partnerships between big ecommerce brands and BNPL companies.

Conclusion: This list is not exhaustive, but it offers a glimpse into some of the areas that fintech players should keep an eye on as we move into the new year. The fintech space is constantly evolving and brands need to create game-changing products within this space, as there is plenty of room for expansion.

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