Crypto 2022: The New Normal in Finance
The turn of the calendar year is a popular time to reflect on the prior one and look ahead to the next.
While the sudden and remarkable explosion of non-fungible tokens (NFTs) in 2021 showcased yet another mainstream application for blockchain, the past year in crypto was largely marked by consistent growth and maturation in conversation around new use cases and benefits of blockchain and crypto. The emergence of new Central Bank Digital Currency (CBDC) projects, deepening policy and regulatory discussions, and a wider embrace of crypto by traditional financial institutions all signaled the technology’s continued growth within mainstream finance.
So, what do the next twelve months hold? According to Ripple’s leadership, 2022 will include a steady drumbeat of new entrants and applications, increased utility and wider adoption around the world for blockchain and cryptocurrency innovations.
Explosive Growth in Crypto Payments
The persistent and global nature of the pandemic continues to highlight inefficiencies within the world’s domestic and cross-border payment systems. This was exacerbated as remittances to low- and middle-income nations roared back to growth in 2021, putting pressure on inefficient cross-border payment systems.
Brooks Entwistle, Managing Director of APAC & MENA, points to the multiple CBDC projects over the last year and their link to national real-time payments systems that are motivated to help improve inadequate payment rails.
He believes this has cleared the way for even more crypto efforts to get off the ground in 2022 and better serve this rapidly growing demand. There is strong potential for new CBDC initiatives, increased investment in, and activity by, crypto-based payment innovators, and collaboration between traditional financial institutions and crypto companies.
In general, Entwistle expects a renewed focus on real-world applications and tangible business outcomes, all of which could lead to even greater growth for RippleNet’s On-Demand Liquidity (ODL) solution in the region.
“While remittances will continue to be a key use case, we can expect other applications to rise to the fore, such as trade flow or treasury management,” said Entwistle.
NFTs Go Mainstream
The market and excitement around NFTs quickly reached a fever pitch in 2021 with total sales anticipated to have topped $17 billion by the end of the year.
For some in the crypto space, this mainstream embrace of NFTs demonstrated in a new way that blockchain and crypto have commercial utility and provided an additional beachhead upon which efforts like Ripple’s $250 million Creator Fund can build new functionality and community.
According to Chief Technology Officer David Schwartz, the key to NFT longevity will be “creating a seamless user experience for mainstream consumers and retailers alike.” There’s no doubt innovation in this space will flourish, but in order for NFT companies to be successful, the infrastructure must support consumer and creator demand.
Monica Long, General Manager of RippleX, believes that innovation in other areas like DeFi (decentralized finance) will also help propel the growth of NFTs beyond just collectibles: “The ability to buy, sell, store or transfer an NFT from a wallet attached to that identity and then seamlessly access it on another means buyers and sellers can confidently verify creators and their creations.”
Eventually, says RippleNet General Manager Asheesh Birla, those NFT use cases that combine aspects of community, access and credentialing will be the ones to gain mainstream adoption.
Regulators Step Up
Pushed by the fast-rising popularity of NFTs, CBDCs and interest by traditional financial institutions in crypto, regulators will figure more prominently in 2022. While there was increased activity over the course of the prior year, oversight remains uneven across countries and regions.
Important efforts like the European Union’s Markets in Crypto Assets (MiCA) regulation are expected to move forward in 2022 (although it will not go into effect immediately). According to Sendi Young, Managing Director of Europe, this increase in regulation plays a critical role in giving companies confidence to enter the space or partner with crypto providers: “Regulation enables nascent technologies to become the new normal.”
General Counsel Stu Alderoty also predicts that at least one country will appoint a crypto-specific regulator within the next year, with the hope that while the United States has fallen behind the rest of the world in regulating crypto, it can reverse course in 2022. He sees crypto regulation as key to a region’s ability to gain an innovative economic center – a leadership position the U.S. may lose should it neglect to establish constructive crypto policy. But he’s noticed a rising level of conversation and focus among policymakers, and hopes they’ll lean into the space to provide some clarity over the next twelve months.
A Multi-Chain Future
Interoperability is also a common theme for 2022 amongst the Ripple leadership team, particularly in its ability to help realize more mainstream adoption and applications for crypto.
Long is adamant that the future of crypto is a multi-chain world. Ethereum – a popular blockchain for the creation and consumption of NFTs – has recently faced scaling issues. For Long, these technical challenges highlight the need for cross-chain interoperability to manage growing developer demand.
“Developers crave the ability to build bridges between networks to meet their specific use cases,” she said. “Achieving this interoperability will be key to breaking down the barriers for broader crypto adoption.”
The need for interoperability is echoed by Birla, who predicts that if decentralized exchanges can utilize cross-chain noncustodial wallets, they will overtake centralized ones for overall market share in 2022.
Ultimately, 2022 will be defined by mainstream expansion and improved customer experience. Overlapping efforts from regulators, central banks, traditional financial institutions and crypto innovators will all build on the past year as an inflection point that will push the industry forward. Customers and consumers alike will benefit from improved infrastructure, user experience, regulatory clarity and interoperability as crypto becomes a critical element of the new normal in finance.