The World Economic Forum (WEF) has predicted that crypto adoption will surge as an important part of the digital financial system but cautioned that 2023 will not be better.
The WEF, a global non-governmental foundation, said in a blog that the surging involvement of traditional banking institutions like JPMorgan will help the crypto sector to gain maturity, and predicted that cryptocurrencies will enter the digital financial system. And going forward, the crypto industry hopes for a strong rebound this year, as new regulations come into force, making the cryptocurrency space more secure.
The WEF blamed regulatory bodies for their failure to prevent the meltdown of many crypto businesses that resulted in the crypto winter phase. The report noted that the current bear situation of the crypto market is much similar to the Dot-com bubble and surely it will bring a new phase for this innovative market with established institutional players.
The forum believes that the disastrous year that 2022 represented for the cryptocurrency industry can lead to growth and recovery of the ecosystem. The blog written by Dante Disparte, chief strategy officer and head, of global policy, circle internet financial, explains that while the recent downfall of FTX and the demise of the Terra blockchain affected millions of consumers in 2022 — with the market losing $2 trillion in that period — this has not changed the core of these technologies, which are currently being tested by financial institutions all over the world.
While the underlying technology of cryptography and blockchain is generalizable to all industries and coordinating activities (collectively the building blocks of Web3), experimentation at the core of financial services, among other sectors, continues unabated, says Disparte.
Disparte cites JPMorgan as an example of this, being a company that publicly has pivoted from being clearly oppositional to crypto and blockchain, to adopting the tech in several of its experimental products and offering crypto to select customers.
For the WEF, the best course of action to perpetuate crypto and blockchain is to “net out their harmful effects by placing technologies (like all tools) in the hands of responsible actors and encouraging their responsible use.”
Disparte believes that crypto, no matter what, remains a protagonist in the financial world and that while regulation is indeed a necessity, countries able to provide it while maintaining a competitive approach will shape the future of the industry. Disparte asserts that these technologies will continue to be implemented despite what he views as the great harm that has been done by using them irresponsibly.
The year 2022 was a terrible year for crypto, as more than $2 trillion in largely speculative market value evaporated, WEF noted.
“Millions of consumers and businesses lost money but perhaps more damaging for the nascent industry and technology was the erosion of fundamental trust in the promise of crypto-finance, which was supposed to be a correction to many of the misdeeds that gave rise to the 2008 financial crisis. This trust was now waning.”
“Meanwhile, policymakers who have been sounding an alarm about cryptos’ excessive risks, while failing to create sensible regulations, have been vindicated by not one, but multiple large-scale failures,” wrote Disparte.
The blog said that the dot-com bubble burst in the early 2000s led to the future of the World Wide Web and the Internet landing into the hands of more durable companies. Likewise, perhaps 2022 will mark a handover of crypto technology and Blockchain infrastructure to steadier hands now.
Indeed, as a test of the staying power of digital assets and Blockchains at the core of financial services (and other areas of the global economy), watch what the big banks and mature financial services firms do, not what they say,” Disparte wrote.
“Herein lies the regulatory and policy conundrum with the epic crypto failures in 2022. The countries that enable responsible competition will shape the future. Cryptography and Blockchains will continue to be integral parts of the modern economic toolkit, despite the great harm these tools may have caused when wielded by the wrong people,” the blog said.
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