This is a guest opinion post from Hervé François, ING’s Financial Markets Digital Assets Initiative Lead and CEO of Pyctor, the digital assets post-trade infrastructure.
Predicting the future is not easy, but that shouldn’t stop us from trying. Here are some of my forecasts for 2022.
In 2022, the People’s Bank of China will continue to develop its digital yuan and accelerate from trials to production. This will increase competition in China’s mobile payments market, which is dominated by Ant Group’s Alipay and Tencent’s WeChat Pay. A similar trend is emerging in India, which plans to launch a pilot central bank digital currency (CBDC) while continuing to ban crypto-assets.
We can expect the world to be divided as follows: non-crypto believers, such as China, India, Indonesia, Turkey, Vietnam, who will work on their own CBDC; crypto supporters, or crypto-friendly tax countries such as El Salvador, Argentina, Portugal, Switzerland, and regions like Europe and the US, who will regulate crypto step by step.
Financial institutions (banks, asset managers, hedge funds) in developed countries are expected to accelerate their adoption of crypto assets. Along this journey, we might witness some massive hacks while the technology matures, pushing some financial institutions to reconsider their position on crypto assets. In contrast, more and more banks will issue security tokens and transact them on the secondary market during 2022.
We will see more solutions such as GMEX Multihub reducing the gap between traditional assets and digital assets. Moreover, we expect some market consolidation in the digital assets post-trade settlement sector with exchanges and tier one banks acquiring digital asset custody solutions. In 2022, production usage of DLT privacy solutions, such as Conclave and zero knowledge proofs (ZKP), could become mainstream. Interoperability will become a priority, with platforms such as Polkadot likely to break through and bring interoperability of Ethereum assets to other DLT/blockchain (both permissioned and non-permissioned).
What’s in store for crypto
Bitcoin might finally cross the $100,000 mark and even hit $150,000 in a high volatility environment, including some 50% plus correction moves. As DeFi progresses and Ethereum 2.0 is implemented, Ethereum could surge to $10,000 per ether in the wave of bitcoin. New blockchains such as Polygon Matic and Solana will get some attention and may be acknowledged as alternatives to Ethereum due to the high and volatile Ethereum gas price in 2022.
DeFi will be under regulator scrutiny. Banks will slowly adopt DeFi, but DeFi will have its second leg of growth as we will be able to lend assets for yield determined by algorithms via smart contracts also for CBDC. We may see some financial institutions trying to catch the trend of DeFi, initially by proposing solutions with private layers on top of the public DeFi protocols.
Non-fungible tokens (NFTs) will remain an area of interest and might start to be taxed in some countries. However, by summer 2022, people will focus more and more on the Metaverse and all the new business models that will emerge from it – the Web 3.0 revolution. We will see additional corporates taking the leap into the Metaverse, following the 2021 move of major luxury brands like LVMH or sporting goods like Adidas or Nike.
We could finally find ways to make crypto less energy-consuming (appreciation of Proof of stake networks and growing pushback against Proof of work), with half of the remaining consumption being from green energy. Thanks to that, Tesla would resume its acquisition of bitcoin for its treasury reserve holdings, fueling the trend of other publicly listed companies which will be counted by the hundreds.
This piece represents solely the opinion of the author and not his company’s view. While most of the facts described might not take place in 2022, they represent trends that could materialize in the coming semesters.
