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This is what the future holds for cryptocurrencies

More than $2 trillion in largely speculative market value evaporated for cryptocurrencies in 2022

More than $2 trillion in largely speculative market value evaporated for cryptocurrencies in 2022 Image: Crypto Crow for Pexels

Dante Disparte
Chief Strategy Officer; Head, Global Policy, Circle Internet Financial
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  • 2022 was a terrible year for cryptocurrencies, with the loss of $2 trillion in market value.
  • We could now see the handover of crypto technology and blockchain infrastructure to more regulated and established institutions.
  • Cryptography and blockchains will continue to be integral parts of the modern economic toolkit.

By any measure, 2022 was a terrible year for crypto. In all, more than $2 trillion in largely speculative market value evaporated.

Millions of consumers and businesses lost money, and perhaps more damaging for a nascent industry and technology, the fundamental trust in the promise of crypto-finance, which was supposed to be a correction to many of the misdeeds that gave rise to the 2008 financial crisis, is waning.

Meanwhile, policymakers who have been sounding an alarm about crypto’s excessive risks, while failing to create sensible regulations, have been vindicated by not one, but multiple large-scale failures.

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To the diehard crypto utopians (and some crypto-anarchists), 2022 was not just another “crypto winter,” but more of an ice age. Along with a broad loss of confidence, economic value and a market littered with the tombstones of failed firms and projects, perhaps the era of crypto speculation will remain frozen in ice, giving way to a Cambrian explosion for responsible, always-on internet finance.

Just as it took the dot-com bubble bursting in the early 2000s to hand over the future of the internet to more durable companies, business models and use cases, perhaps 2022 marks a handover of crypto technology and blockchain infrastructure to steadier hands.

While the underlying technology of cryptography and blockchain is generalizable to all industries and coordinating activities (collectively the building blocks of Web3), experimentation at the core of financial services, among other sectors, continues unabated. Indeed, as a test of the staying power of digital assets and blockchains at the core of financial services (and other areas of the global economy), watch what the big banks and mature financial services firms do, not what they say.

To the diehard crypto utopians (and some crypto-anarchists), 2022 was not just another “crypto winter,” but more of an ice age.
To the diehard crypto utopians (and some crypto-anarchists), 2022 was not just another “crypto winter,” but more of an ice age. Image: Coinmetrics

While the most famous volte-face on policy towards crypto and blockchain belongs to JPMorgan, they are no longer alone among major financial institutions in embracing Web3. Arguably, just as boards and executive teams reluctantly owned their cybersecurity and digital transformation mandates, the embrace of crypto technology is equally inevitable, even if the term feels like a bad word. For all its faults, this technology remains a protagonist in the global financial world.

History is riddled with examples of otherwise good or neutral technologies being co-opted by bad actors and those ever-present human follies of greed, nescience, risks of opportunity or outright criminality. All of which are amplified in emerging, lightly regulated sectors and accelerated by technology. Indeed, no sector is risk-free, especially not one involving money. However, crypto punishes the errant at speed, giving bad actors few places to hide.

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How is the World Economic Forum promoting the responsible use of blockchain?

Remember how crypto was born from anonymous trading activities on the so-called dark web? Or how insidious global ransomware attacks like WannaCry in 2017 spread worldwide in days, delivered by seemingly innocuous emails and triggered by perilous human curiosity between the keyboard and the chair?

Yet we didn't ban the internet or email. The more enduring approach with all breakthrough technologies is to net out their harmful effects by placing technologies (like all tools) in the hands of responsible actors and encouraging their responsible use.

Herein lies the regulatory and policy conundrum with the epic crypto failures in 2022. The countries that enable responsible competition will shape the future. Cryptography and blockchains will continue to be integral parts of the modern economic toolkit, despite the great harm these tools may have caused when wielded by the wrong people.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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Forum InstitutionalFinancial and Monetary SystemsEmerging Technologies
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World Economic Forum

May 21, 2024

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