There’s no denying that 2021 was the year that cryptocurrency went mainstream. Even with a couple of bad busts to counter the booms, Bitcoin gained acceptance as a financial asset rather than some far-out, libertarian fantasy money project. Cryptocurrency came into its own, showing governments, financial institutions, and businesses in general how it could be a boon to the economy and the bottom line. Non-fungible tokens (NFTs) are bringing blockchain technology into mainstream culture, attracting buyers not interested in financial cryptocurrency. And millennials are no longer the only ones piling in as investors.
So, without further ado, here are 10 predictions for what 2022 holds for crypto.
Crypto goes (more) mainstream: The estimates of how many Americans own or have owned crypto varies widely, but the 12% to 13% range seems to be where the most impartial surveys come down. The wealthy and institutional investors seem to be piling in as investment choices provided by banks, hedge funds and other advisers grow. Main Street is a different story. Bitcoin may be in the doldrums price-wise at the moment, but it’s getting easier for average people to buy the biggest cryptocurrencies thanks to Square, PayPal, Venmo, Robinhood and other options that don’t require signing up for an exchange account or buying a cold wallet — or knowing what a cold wallet is — multiply.
See also: In 2021, Crypto Got Ready for Its Close-up
Altcoins are ready for their close-up: Bitcoin and ether are becoming known more broadly, at least within the millennial/Gen-Z and crypto-curious crowd. As BTC and ETH become more mainstream as investments, the interest in investing in other top 10 to top 25 cryptocurrencies will grow. Expect to hear about Solana, Cardano, Polkadot, Avalanche, Polygon, Algorand and other serious investment coins. We’d like to say that the result of that is dogecoin and its dogged followers like Shiba Inu will go away, but expect to see Elon Musk continue to successfully push the joke coins into serious territory.
Read more: Is Paxos the New Diem? The Stablecoin Issuer’s Facebook Pilot Just Expanded to 2B WhatsApp Customers
Stablecoin regulation explodes: The December announcement that Meta-owned Novi Wallet is piloting Paxos stablecoin payments on WhatsApp, Mark Zuckerberg’s two-billion-customer messaging app is not very different from Facebook adopting the Libra/Diem stablecoin. The prospect of that global non-national currency becoming available to Facebook’s 2.3 billion customers made politicians, Treasury and finance ministry officials, and central bankers around the world apoplectic back in 2019. They feared that it would undermine national currencies and government control of financial systems, make virtual bank runs more likely, and generally unleash a plague of locus upon financial institutions. They’re soon going to wake up to the reality that Paxos/WhatsApp is little more than a name change, and the regulatory hammer will fall.
See also: The Battle of Stablecoins vs. CBDCs Is Really Two Smaller Wars Also Fighting Each Other
The digital dollar is coming: There’s already plenty of signs that countries around the world are getting more serious about central bank digital currencies — essentially nationally issued digital legal tender that competes with stablecoins and payment cryptocurrencies — with Jamaica announcing the first-quarter rollout of a digital currency and Mexico aiming for a 2024 launch of a digital peso to start the new year. Most major economies and large developing nations from the EU to India are looking seriously at both retail and wholesale CBDCs — actually, almost everybody but the U.S. That’s going to change by February, when China rolls out its digital yuan in the world’s second-largest economy (third if you count the EU as a single entity) and the argument that the U.S. is falling behind its biggest economic, political, and military rival becomes real to the voting population at large. Treasury Secretary Janet Yellen is undecided and Fed Chairman Jerome Powell sees no need. The Fed will drag its heels, but a digital dollar will move from “if” to “when” in 2022.
You may also like: Treasury Secretary Yellen Says She Hasn’t Decided on Digital Dollar Creation
The SEC will get crypto authority: The U.S. Securities and Exchange Commission (SEC) will likely get the formal oversight authority of cryptocurrencies that Chairman Gary Gensler wants, instead of a new agency, but with its wings clipped. The SEC will be prodded by congress to make a looser, more innovation-friendly definition of when a cryptocurrency is — and more importantly is not — a security, probably giving the Commodity Futures Trading Commission (CFTC) some oversight role.
See also: Sen Lummis’ Christmas Present to Crypto: Clear Regulation in the New Year
Crypto take big finance: The biggest banks and financial institutions are offering wealthy clients bitcoin investments, offering custody solutions, and looking at adopting crypto for back-end settlements — some privately like JPMorgan Chase with enterprise blockchain stablecoin JPM Coin, others using commercial solutions like international payments firm Ripple, and still others wholesales CBDCs. Financial institutions and investment firms’ crypto and blockchain departments are on hiring sprees, and executives understand that they need to understand it. And government regulators worldwide are planning how to regulate crypto — at the retail and institutional level — rather than whether to kill it.
Read more: JPMorgan to Power Payments for Siemens Using Private Blockchain
Bitcoin-as-currency will fade: It may break Jack Dorsey’s heart, but bitcoin and all other non-stablecoin cryptocurrencies are simply too volatile to be used as a day-to-day currency anywhere the economy hasn’t completely collapsed — we’re looking at you, El Salvador and at you, Tesla. Between stablecoins and CBDCs, Bitcoin creator Satoshi Nakamoto will lose the payments battle, but his technology — blockchain — will start winning the war.
See more: Twitter, Square CEO Jack Dorsey Bullish On Bitcoin
DeFi will be co-opted: We’re going to be crypto-skeptics here. Decentralized finance will show it has legs and will boom this year, but the legs will slowly be cut out from under it in two ways: First, regulation. This could be more of a multi-year process, but governments don’t like financial markets they can’t control. They may or may not be able to stop decentralized exchanges and lending platforms from existing, but they can sure make it illegal to use. (A caveat: If DeFi becomes a partisan issue supported by the GOP and opposed by Democrats, this will take a lot longer.) Second, financial institution (FI) middlemen will adopt the blockchain tools that give DeFi much of its advantage but with the benefit of centralized management. Either way, consumers will benefit for once.
A corollary of this is that DAOs — decentralized autonomous organizations that allows decentralized governance models — will see wider adoption. Look more to ConstitutionDAO than lending platforms, as truly transparent governance has a lot of uses.
Read more: DeFi Is the New Big Thing in Crypto. But What Is It? Here’s Everything You Need to Know
NFTs will permeate the culture: Non-fungible tokens have too many potential uses in fields ranging from the arts to gaming to legal and financial areas like real estate and tokenization of assets. Besides, there are plenty of benefits for the people who would have to adopt them: Artists and musicians could build automated royalty into the resale of anything they produce, while real estate sellers will be able to vastly expand their buyer pools at all levels by fractionalizing property ownership via NFT tokenization.
See more: PYMNTS NFT Series: What Are NFTs and Why Are They Crypto’s Newest ‘Next Big Thing?’
Metaverses will show they have legs: The interactive nature of metaverses as a platform for social interaction, commerce, recreation, education, and politics will make them a bigger and bigger part of both the economy and the culture. They may be decentralized or not, but they are coming. That said, Facebook won’t rule the metaverse. It is too ungainly and too distrusted to move fast and break things anymore.
See also: What’s a Metaverse, and Why is One Having a Fashion Show?
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