CBDCs, cryptos, DeFi, NFT, all with an overlay of blockchains for decentralised record keeping, authentication, and transaction tracking, are increasingly ubiquitous.
Group Research – Econs 2 Mar 2022
- There is no denying the size and scope of the digital asset universe
- At the same time, the asset class is under greater regulatory scrutiny than ever before
- The asset class has also been subject to substantial volatility
- Role of cryptos as safe haven is questioned due to price changes’ correlation with risk-on moves
- Beijing showcases e-CNY at Winter Olympics
Introduction: Deeper roots; high volatility
CBDCs, cryptos, DeFi, NFT, all with an overlay of blockchains or shared databases to ensure decentralized record keeping, authentication, and transaction tracking, are increasingly ubiquitous. In this update, we showcase figures, initiatives, and use cases to underscore the phenomenon. There is no denying the size and scope of the digital asset universe; at the same time, the asset class is under greater regulatory scrutiny than ever before. From China to India to the US, attempts are being made to restrict their use or to bring them under the formal tax net. At the other end of the regulatory spectrum, some countries, in their attempt at economic stablisation and liberalisation, have made a few cryptos legal tender. There has even been a spike in usage during the ongoing conflict in Ukraine as forms of donation.
The asset class has also been subject to substantial volatility, and the role of crypto assets as a safe haven has been challenged as price movements have been largely correlated with risk sentiments, i.e. “risk-on” for equities has been associated with crypto rallies and vice-versa. As a hedge against inflation or market volatility, cryptos have not been up to the mark.
Central banks keep moving toward operationalising digital payments that are faster, cheaper, and more transparent with cross border capabilities. This is at the intersection of regulation and technology, and will be influencing the future of trade and commerce profoundly.