2022 Informed: Blockchain, Central Bank Digital Currency and NFTs predictions

Blockchain struggles on with its efforts to get recognised as a legitimate asset class while nations will continue to experiment with their own digital currencies. Meanwhile small firms, social media platforms and creative entrepreneurs will take a deeper dive into NFT creation and acquisition

1: Blockchain will continue its slow path towards standardisation

“With more firms and individuals introducing cryptocurrency to their balance sheets, the sheer size of the crypto industry will force regulators to closely monitor the sector, yet the challenge of achieving universal agreement on the treatment of these digital assets continues.

“The uncertainty in terms of the recognition and measurement of cryptocurrencies is critical. They are not classified as cash or cash equivalents because they are not currently legal tender. Nonetheless, when held on a balance sheet the potential exists for volatility spill over from the crypto price markets to our established equity capital markets.

“To become a truly integral part of the financial system, blockchain must be standardised. Though we will continue to see a standardisation in 2022, this process is likely to take many years. Accurate reporting of these assets is more complex than ever, particularly as accounting is increasingly intertwined with and responsible for the business operations function.

“However, the growing appetite for cryptocurrency means conditions are optimal for software that provides a more elevated approach.”

Adam Zoucha, EMEA MD, FloQast

2: Expect more Central Bank Digital Currency pilots

“Digital currencies issued by central and national banks are coming: it’s only a matter of time. Interest in Central Bank Digital Currencies (CBDCs) has been growing, fuelled by the rapid European-wide digitisation of payments during the pandemic, as well as growing interest and competition from cryptocurrencies (i.e. Bitcoin) and stablecoins (i.e. Tether).

“The underlying technology for digital currencies like the e-Euro or the e-Krona is the same as for cryptocurrencies – in other words, it already exists! We just need regulation to catch up and to ensure the supporting technology does not exclude anyone.

“In 2022, expect more national pilots, rollouts and regulatory adjustments to prepare for the biggest shake-up to money in a generation.” Robert Hoffmann, CEO of Merchant Services, Nets

3: Smaller firms and entrepreneurs will take advantage of NFTs

“2021 was the year of the NFT as they moved into the mainstream and started to command huge sums of money from some big names.  We expect the trend for so- called ‘non fungible tokens’ – a digital version of a one-of-a-kind trading card – to continue to grow in 2022 as many see the value in their investment. We expect to see smaller, less well known artists take advantage of the control NFTs allow creators to have.”

Rory Kenny, CEO of music technology company Loudly

“The NFT marketplace truly boomed in 2021. So much so that the word NFT has become Collins Dictionary’s word of the year. Our research has shown that users have sent at least $26.9 billion worth of cryptocurrency to Ethereum smart contracts associated with NFT marketplaces and collections.

“We’ve also identified that only a tiny group of highly-sophisticated investors rake in most of the profits from NFT collecting. This is especially true in minting, where the ‘whitelisting’ process gives early supporters of collection access to lower prices that result in greater profits.

“In 2022, we predict investment techniques, such as the use of bots by investors looking to purchase during minting events, will continue to develop and could potentially shut out less sophisticated users.

We also anticipate the NFT market will continue to evolve over the next year, as more artists, creators, celebrities, and even video game makers launch collections catering to their fans, along with many other use cases that haven’t even been invented yet.”

Ethan McMahon, economist, Chainalysis