Cryptocurrency leaders see exponential growth; banks embrace crypto as an asset class
Digital asset skeptics take note: Not only is cryptocurrency here to stay, but 90% of the global population is predicted to adopt it over the next decade, says one of the world's leading crypto infrastructure developers.
The current estimate of global cryptocurrency users is about 4%, or 300 million people.
"This is an innovation and a paradigm shift at least as big as that of the internet," says Torbjørn Bull Jenssen, CEO of Nordic-based Arcane Crypto, a technology and investment firm focused on bitcoin and digital assets based in Norway. Jenssen made his bold prediction last Thursday at Oppenheimer's Fourth Blockchain and Digital Assets Summit.
Jenssen was joined by two other crypto infrastructure market leaders: Richard Byworth, CEO of Singapore-based EQONEX Group, a full-service crypto financial firm and cryptocurrency exchange, and Luke Dorney, head of sales and partnerships for Zodia Custody, a digital custody offering developed by Standard Chartered and Northern Trust banks and based in the U.K.
The panelists shared their observations on the current state of the crypto market overseas with moderator Elliot Chun, founder of Emergents, now part of strategic financing company AP Crypto.
2021: A milestone year for crypto
The Oppenheimer summit -- a day-long, virtual event bringing blockchain and digital asset leaders together with investment professionals -- couldn't have come at a better time. A milestone year during which crypto reached a new stage of maturity, 2021 saw several of the world's leading institutional financial firms offer cryptocurrency as an asset class to investors.
In March, Morgan Stanley announced that it was launching access to three funds enabling Bitcoin ownership. It was the first major US bank to offer the famed cryptocurrency as an asset class (albeit only to its wealthier clients who have "an aggressive risk tolerance"). After years of watching and waiting, investment firms such as Goldman Sachs, JPMorgan Chase and Wells Fargo followed suit, spurred on by their clients demanding access to crypto.
Other crypto highlights in 2021 include: El Salvador accepting Bitcoin as legal tender; the launch of ProShares Bitcoin Strategy ETF, America's first exchange-traded Bitcoin futures fund; Canadian regulators' approval of ETFs that hold Bitcoin directly; and tech giants Tesla and MicroStrategy adding Bitcoin reserves to their balance sheets.
As of mid-November, the global market value of cryptocurrency is $2.8 trillion, according to CoinMarketCap.
"I'm bullish on the adoption [of crypto] driving upwards, purely on the basis that I'm seeing so many traditional firms entering this space and needing to talk to someone like us," says Zodia Custody's Dorney. "We're seeing global asset managers setting up their structures already, and there's more coming down the pike."
A call for regulation
As major financial institutions jump onto the crypto bandwagon, the demand for regulation grows. Much of the panel discussion centered on the need for regulation as more investors -- who want to invest in safe, secure, and lucrative investments -- eagerly enter the burgeoning world of crypto assets.
"I think we're in the early majority phase of the adoption curve, and that means you're looking at people coming in now that aren't willing to take major risks," says EQONEX's Byworth. "You're going to run into issues where investors will complain to regulators if they get scammed... so regulators need to wake up and realize that they need to protect people from some of these issues."
EQONEX, the first cryptocurrency exchange to be listed on a US equity market (NASDAQ), is focused on building an exchange with a thorough process that lists sensible blockchain projects with good security, technology, and methodical processes that appeal to investors.
"I think that's the way regulators need to look now that we're starting to see a much broader based adoption coming into this industry," says Byworth.
Finance
"We're here to help with the development of the post-trade infrastructure for institutional clients investing in crypto," notes Zodia Custody's Dorney. "What we're interested in doing is trying to improve on what's already been built today and make it a safe environment for our clients to break down the barriers of entry."
In Europe, Arcane Global's Jenssen says the regulatory environment is "pretty good," thanks in part to such regulations as the EU's fifth Anti-Money Laundering Directive. It requires crypto-asset businesses to implement risk-based policies and procedures to comply with Anti-Money Laundering and Counter-Terrorism Financing Regulations, known as AML/CTF. But Jenssen warns that some regulations being developed might be damaging to the crypto industry in the future.
One such proposed regulation is the EU's Regulation of Markets in Crypto-Assets (MiCA), designed to regulate out-of-scope crypto-assets and their service providers in the EU while also providing a single licensing regime across all member states by 2024. Critics believe that MiCA, which was proposed in response to the initial coin offering boom of 2017, may impose insurmountable constraints on businesses and hamper innovation.
"There will be a lot of new regulations that they will try to tailor to crypto that will be inconsistent with how the sector works… but overall it's working very well right now," says Jenssen.
Meanwhile in Asia, the cryptocurrency market was rattled in late September after China formally announced that all cryptocurrency transactions are illegal and banned its citizens from working for crypto companies. Exit Bitcoin, Ethereum, and the countless Chinese startups from Mainland China, including Byworth's Hong Kong-based EQONEX.
"My view, very strongly, is that it's related to the digital yuan, and they want to make sure that there's no competition for that," says Byworth. "There's no doubt that they will use their long arm to influence other jurisdictions, and one they can probably influence the most is likely to be Hong Kong."
Fortunately, EQONEX has found a new home in Singapore. Byworth, who moved to Singapore from Hong Kong the week of the summit, noted that the Monetary Authority of Singapore (MAS) has a major opportunity to be a fintech hub. It can take advantage of the fact that regulators in other countries, including Japan and South Korea, have been more restrictive in how they operate.
Byworth says he attended the Singapore FinTech Festival earlier this month to hear Ravi Menon, head of the MAS, implore every crypto company in attendance to move to Singapore. "The regulators are embracing them with open arms," says Byworth.