ETA Expert Insights: Top 10 Trends in Crypto

1. Crypto exchanges relocating offshore particularly Europe where regularly framework exists with the MICA legislation which offers transparency rules, governance of token issuers, and operation and structure requirements.

2. Bitcoin bucks the markets and sees increase of 16.5 % this month is bitcoin starting to de-couple from traditional markets. Has the instability in current US banking made bitcoin more attractive as a safe harbour asset.

3. Decentralized and self custody wallets.. as centralized exchanges showed vulnerabilities and unscrupulous use of customers assets we’ve seen a major increase is self custody and self custody products. Hard ware wallets. DEX’s are the benefit of this trend. As consumers become more comfortable with digital wallets and also crypto removes friction from the process. We see a combination of self custody and qualified custodians storage of digital assets moving forward.

4. A trend down creation of new digital assets. The boom of digital assets has slowed tremendously a lot to do with regulatory crack down on the industry there’s still no defined legal and laws in place but the SEC has made its presence felt and new digital assets saw a decline in issuing. On that note new digital asset creation is key to the metaverse and web3 applications. There will need to be defined laws and or rules created otherwise innovation will be lost to other regions of the world.

5. Overall sentiment in digital asset trading is low and has been trending down for 12 months so trading has been non existent up until a month ago. Activity in trading is a new trend we’re seeing, how long it’s sustained we will see but it has increased mainly by institutional investor the trend for retail investing has not seen much activity but always follows institutions.

6. Crypto becomes more than trading with blockchain technology (not in the form of fungible, speculative tokens) begins to enter other industries and businesses: NFTs as a form of prescribing ownership to any asset, stablecoins for inflation hedging in emerging markets, etc.

7. Acceleration of global regulatory initiatives to define a framework for cryptoasset activities, eg HK, EU, UK, Singapore. This means more requirements on providers and sometimes their intermediaries on licensing, safeguarding and transactions monitoring & reporting (e.g. AML, tax).

8. Following the failure of US and Swiss banks, US and Canadian Policy makers are wary of crypto. One of the main policy questions is the acceptable degree of prudential exposure for banks with digital assets. The crypt question has underlying implications for recurrent themes for financial services: financial stability, safety and soundness, consumer protection and competition between regulated and non-regulated entities.

9. The “crypto winter” narrative pushes three key trends forward:

• Traditional finance giants are moving in to offer more secure and mature alternatives to crypto firms who have lost trust and VC money – following BNY Mellon and Fidelity, Nasdaq is also about to launch its crypto custody product.
• Focus on more modest/boring applications of DLT uses cases in financial services, e.g., tokenization of commercial bank deposits, bonds and securities, stablecoin instant settlements.
• The erosion of trust towards private digital money initiatives is also pushing central banks around the world to look at a public digital money alternative: CBDC.

10. The lack of auditing standards for crypto custody wallet services is a key issue. Industry is looking at proof-of-reserves (PoR) to address it but there are still many challenges with this mechanism – for example, it has to provide clear assurances on liabilities. Texas has introduced a legislation on PoR but at there are still no federal or global agreed standards from regs and the Big Five on PoR.