After the crisis of confidence, five trends to watch in 2023

After the euphoria of 2021, a cold shower and scandals. A year ago, cryptocurrency experts were still promising a new world. “greater acceptance of bitcoin as a means of payment, increase in NFT activity”even cause “Metaver’s New Currencies”… in the background“Increasing Regulatory Control”. Soaring interest rates, collapsing tech stocks, plummeting cryptocurrency prices, and increasingly rifts in the still nascent and fragile ecosystem have somewhat dampened the most optimists.

But the explosion of cryptocurrencies in recent years has raised fears “New Scams and New Schemes in 2022”warned a Queen’s University study, relayed by the site Conversation. So, a simple growth crisis or a deeper questioning of cryptocurrencies or even its underlying technologies, such as bockchain? That is the question asked today.

A deep crisis of confidence after the scandals

In fact, 2022 will see a series of crises and collapses: the collapse of the Celsius Network trading platform and the stablecoin – which should have been more stable because it was backed by the dollar – TerraUSD in May, the spectacular bankruptcy, undoubtedly a scam, the empire’s FTX in November, still valued $32 billion in early 2022… and a 60% drop in cryptocurrency capitalization to $1.3 trillion. Cryptocurrency star Bitcoin, which is set to double in value to around $65,000 in 2021, is currently trading around $16,000. Its rival, ether, is not faring much better, with its price falling by 73% in a year.

The domino effect has crossed the sector, one crypto-asset playing the role of counterparty to another: BlockFIn, Genesis, hedge fund Three Arrows Capital, Winklevoss brothers’ Gemini lending platform, French Coinhouse… many platforms have exposed themselves. With the bankruptcy of FTX. Most recently, Core ScientificOne of the largest publicly traded cryptocurrency mining companies in the US filed for bankruptcy in December. It’s gotten to the point where some are comparing it to Lehman Brothers, which caused panic in the markets and took several banks with it.

Clément Coeurdeuil, co-founder of the Yuzu platform, summarizes, “The return of trust will take a long time, because trust is gained in drops, but lost in liters.”

In 2023, the regulatory wind will blow stronger

Also, 2023 should mark the end of some regulatory slack. In Europe, the earliest this will be is the entry into force of the European MiCA directive in 2024 (Market for crypto assets), a text that defines the definition of each digital asset and possibly requires approval for players before the new regulatory tightening. Christine Lagarde, head of the European Central Bank (ECB), has already called “MiCA 2”.

The European text is also heavily inspired by the French regulations, which since the Pact law of 2019 define the status of a service provider for digital assets (Psan) supervised by the Autorité des marchés financiers (AMF). Licenses and other registrations must be applied for before operating anywhere in the Old Continent. Also, these service providers must prepare for TFR regulations next year (Procedure for transferring funds) in 2024 will force identification of both the originator and the beneficiary of a transaction in cryptocurrencies.

Cryptocurrency issuance projects without a real business model behind them should not find buyers, especially with stricter regulations on the economic aspect. The MICA rule may have this effect” flight to quality in the crypto market. The gap between the real value of assets and their Tokenian rating should continue to narrow,” predicts Franck Guiader, Director of Innovation and FinTech at Gide Loyrette Nouel.

In the US, the Biden administration certainly wants to make transactions in cryptocurrencies easier, but the SEC and its chief, Gary Gensler, want to punish fraud more harshly. In the meantime, market platforms will mobilize their efforts, especially the most important ones, such as Binance, the world leader based in Hong Kong, or American Coinbase, which is listed on Wall Street and therefore subject to greater transparency. assuring customers, investors and… regulators.

Gary Gensler, the cop of the American Stock Exchange, is becoming the nightmare of cryptocurrencies

towards a bull run In 2023?

“An interesting thing to watch in 2023 will be the performance of players in traditional finance, especially banking: they have a window of opportunity that should not be seen again every year. Their pure player competitors are experiencing a discount in valuations and a crisis of confidence, regulation is structuring and opening opportunities to offer crypto services, and demand continues to grow.” is evaluated Alexandre Stachchenko, blockchain and crypto director of KPMG France.

This windfall of regulation should whet the appetite of investment funds, which began flocking to cryptocurrencies during the euphoria of 2021. bear market Down in 2022, “ bull run the crypto market is on everyone’s lips.

“If valuations appear to be more ‘fair’, especially through standards and methods shared by the cryptocurrency community and recognized by regulators, investors should follow and participate in this ‘bull run’. expected”Franck Guiader of Gide Nouelle confirms.

Platform concentration

But 2022 will leave a lasting mark on cryptocurrencies.

“Two phenomena can be observed in 2023. First, considering the difficulties experienced, the concentration of platforms and the need to create volumes to be more profitable. The preparatory year to access the MCA should encourage platforms to integrate new legal skills, cyber security experts and commercial developers, especially to build new partnerships abroad »asks Franck Guiader.

“Healthy” platforms will likely be forced to scale back and refocus. Kraken, for example, is downsizing and exiting Japan. Less healthy platforms will find it difficult to hide their shortcomings and will be in a vulnerable position.”Alexander Stachchenko is abundant.

Also read lessons from the FTX scandal, according to Ledger CEO Pascal Gauthier.

Acceleration of central banks

At the same time, and for several years now, central banks will try to implement a digital currency project in 2023 to offer an alternative to cryptocurrencies.

While adoption of crypto-assets is happening faster in developing countries, central banks in these countries are accelerating in parallel, according to a recent study by Chainalysis. Thus, in 2023, experiments will be held in Egypt, Turkey and India. At the height of the war in Ukraine, Russia also intends to continue its experiments with the digital ruble in 2023.

Finally, the European Central Bank (ECB) may be pushing ahead with its digital euro, despite banking sector hesitancies.

“It is not difficult for the ECB to propose a digital euro project. I really hope that the topic will become more politicized than it is today. This is an important issue for all citizens and the current direction taken is the assumed Chinese model. Mrs. Lagarde (ECB president, editor’s note) reminded that Europe is lagging behind China.– Alexander Stachchenko says.

However, as in the USA, the road to the adoption of MDBC (central bank digital currency) in Europe is still long. In 2023 “The response of central banks to the ‘tokenization’ of a part of the economy should be done by clarifying the use cases where another format of the currency could be useful. A central bank digital currency can meet certain needs and certain technological standards in BtoB, for example, taking into account the use of blockchain by certain financial infrastructures. Franck is waiting for Guiader.

Finally, tracking the effects of recent legislation in Kazakhstan, one of the world’s leading cryptocurrency producers, with mining activity in 2023. Although China has already officially banned mining in 2020, the state has tightened its legislation on the crypto-creating industry, introducing new taxes and mandatory licensing for mining companies.

Also read Developing countries are at the forefront of cryptocurrency adoption