After the euphoria of 2021, cold shower and scandals. A year ago, cryptocurrency experts still promised a new world, “greater acceptance of bitcoin as a means of payment, increase in NFT activity”even causing “new currencies of Metaverse”… in the background of“Increasing Regulatory Scrutiny”. The sharp rise in interest rates, the collapse of tech stocks, the slide in crypto prices and the ever-tightening cracks in a still nascent and fragile ecosystem have somewhat rattled the most optimistic.
The explosion of crypto exchanges in recent years, however, raised fears “New scams and new schemes in 2022”announced a study from Queen’s University, reported by the site Conversation. So simple growth crisis or deeper question of crypto, or even its underlying technologies, such as bockchain? This is the question being asked today.
Deep crisis of confidence after the scandals
2022 will in fact have seen a series of crises and crashes: the collapse of the Celsius network trading platform and the stablecoin – which is supposed to be more resilient because it is backed by the dollar – TerraUSD in May, the spectacular bankruptcy, no doubt fraudulent, in November of the empire FTX, but rated at $32 billion in early 2022… and a 60% drop in crypto capitalization to around $1.3 trillion. Bitcoin, the crypto star that saw its value double in 2021 to peak at nearly $65,000, is now trading around $16,000. Its challenger, ether, is no better, with a 73% drop in its price over the course of a year.
A domino effect has crossed the sector, a crypto-asset plays the role of the other party: BlockFIn, Genesis, the hedge fund Three Arrows Capital, the Gemini lending platform of the Winklevoss brothers, the French Coinhouse… many platforms found themselves exposed. from the bankruptcy of FTX. Most recently, Core Scientificone of the largest publicly traded cryptocurrency mining companies in the United States, filed for bankruptcy in December. The scale is such that some draw an analogy with Lehman Brothers, which had sown panic in the markets and taken several banks with it.
“The return of trust will take a long time, because trust is gained point by point, but lost by liters”, summarizes Clément Coeurdeuil, co-founder of the Yuzu platform.
The regulatory wind will blow stronger in 2023
Also, 2023 should mark the end of some regulatory slack. In Europe, this would be the entry into force, at the earliest, of 2024, of the European MiCA directive (Market for crypto assets), the text that defines the definition of each digital asset and imposes approval on players, possibly ahead of a new regulatory tightening. The head of the European Central Bank (ECB), Christine Lagarde, has already called for a “MiCA 2”.
The European text is also heavily inspired by the French regulations, which establish the status of the service provider of digital assets (Psan), supervised by the Autorité des marchés financiers (AMF) since The law of the covenant of 2019. In other words, it will be necessary to apply for licenses and other registrations before operating anywhere in the Old Continent. Also, these service providers will have to prepare next year for TFR regulations (Regulations for the transfer of funds) that will force, in 2024, to identify the author as well as the beneficiary of a crypto transaction.
” Projects for issuing crypto assets without a real business model behind them should no longer find takers, with stricter regulations, especially in economic terms. The MiCA regulation may have this effect of ” flight to quality in the crypto market. The gap between the real value of assets and their ‘token’ valuation should continue to narrow,” predicts Franck Guiader, Director – Innovation and FinTech at Gide Loyrette Nouel.
In the United States, the Biden administration certainly wants to facilitate crypto transactions, but punish fraud more harshly, under the leadership of the SEC and its chief Gary Gensler. Meanwhile, market platforms, and in particular the most important ones, such as the world leader Binance, based in Hong Kong, or the American Coinbase, listed on Wall Street, and therefore subject to greater transparency, will mobilize efforts theirs to appease customers, investors and… regulators.
Towards a bull run in 2023?
“An interesting thing to watch in 2023 will be the activity of players in traditional finance, especially banking: they have a window of opportunity that does not have to re-emerge every year. Their pure player competitors are facing a decline in their valuation and a crisis of confidence, regulation is being structured and opening up the possibility of offering crypto services and demand continues to grow. rated Alexandre Stachchenko, blockchain and crypto director at KPMG France.
This wind of regulation should whet the appetite of investment funds which have already begun a move towards crypto during the euphoria of 2021. After “ bear market down in 2022,” bull run of the crypto market, is on everyone’s lips.
“If the valuations look more ‘fair’, especially through the standards and methods shared by the crypto community and recognized by regulators, investors should follow and participate in this bull run.” expected”confirms Franck Guiader of Gide Nouelle.
But for crypto platforms, 2022 will leave a lasting mark.
“Two phenomena can be observed in 2023. First, a concentration of platforms, given the difficulties experienced and the need to generate volumes to become more profitable. The year of preparation for entering MiCA should encourage platforms to integrate new legal skills, cyber security experts and commercial developers to create new partnerships, especially abroad »predicts Franck Guiader.
“Healthy” platforms will probably be forced to downsize and refocus. Kraken is downsizing and retiring from Japan for example. Less healthy platforms will find it difficult to hide their shortcomings and will be in a delicate situation.”there are many Alexander Stachchenko.
Acceleration of central banks
At the same time, and already in the pipeline for several years, central banks will seek, in 2023, to materialize their digital currency project to provide an alternative to cryptocurrencies.
While adopting crypto-assets is done faster in developing countries, according to a recent study by Chainalysis, the central banks of these countries are accelerating in parallel. In 2023, experiments will take place in Egypt, Turkey and India. In the midst of the war in Ukraine, Russia also aims to continue its experiments in 2023 on a digital ruble.
Finally, the European Central Bank (ECB) may move forward with its digital euro, despite the hesitations of the banking sector.
“It is unlikely that the ECB will propose its digital euro project. I really hope the topic is more politicized than it is today. This is a fundamental issue for all citizens and the current direction taken is a supposed Chinese model. Ms. Lagarde (ECB President, editor’s note) recalled that Europe was lagging behind China.says Alexander Stachchenko.
But in both Europe and the United States, the road to adoption of an “MDBC” (central bank digital currency) is still long. In 2023, “The response of central banks to the “tokenization” of a part of the economy will have to be done by refining the use cases for which another currency format can be useful. The digital currency of the central bank can initially fulfill certain technological needs and standards in BtoB, given the use of blockchain, for example, by some financial infrastructures. predicts Franck Guiader.
Finally, to see in 2023, the effects of recent legislation in Kazakhstan, one of the world’s leading producers of cryptocurrency with mining activity. While China has already officially banned mining in 2020, the country has tightened its legislation regarding the crypto-creation industry, imposing new taxes and a mandatory license for mining companies.