The future of money may be here but will it work for you?

Crypto, web3, and blockchain have gained significant attention in the past year and have entertained, inspired, and shocked us with their diverse characters and dramatic events. However, the extent to which they will impact our lives in the years ahead remains uncertain. Here are some key trends for 2023:

Defi is King - Sort of: Despite a predicted rise in the use of decentralised finance (Defi) protocols for trading and exchanging assets, as well as an increase in non-custodial Defi wallets, trust is still a crucial factor. While being trustless through cryptography is efficient, mainstream adoption may not occur until 2024 or later. However, I do anticipate improvements in governance in centralised finance (CeFi) protocols, as well as an entry of traditional finance (TradeFi) players into the space, which will boost crypto and web3 adoption.

CBDCs: The future of money? Central bank digital currencies (CBDCs), digital versions of existing currencies on a blockchain or centralised ledger, will bring the efficiency of blockchain to traditional currencies. CBDCs have the potential to save on money handling costs and increase financial inclusion, bypassing existing distribution infrastructure. With Nigeria and the Bahamas already using CBDCs, and many central banks exploring their deployment, this trend is likely to continue. However, CBDCs will carry the same baggage as their underlying fiat currencies, such as controls and devaluation.

Stable coins — A key engine: Stable coins, digital currencies backed by real-world assets or currencies, offer the benefits of blockchain with the stability of fiat currency. I expect to see a surge in their use for money transfers (example Stellar USDC & MoneyGram), and as a means of bringing crypto into mainstream payments. To gain success, trust and regulation will be critical, and we may see a push towards regulation and transparency or the launch of stable coins by traditional banks and TradeFi players (e.g. National Australia Bank in Australia).

NFTs — The age is upon us: Non-fungible tokens (NFTs) have more to offer than just pictures of monkeys or apes. NFTs will continue to impact the worlds of fashion, sports, entertainment, and more, serving as digital twins, entry tickets, profile pictures, or entry into exclusive clubs. Brand collaborations with NFTs are on the rise and this trend is likely to continue as more brands enter the web3 space. NFTs also have the potential to replace traditional loyalty programs, being instantly transferable, tradeable, and allowing participation in web3.

Tokenisation — Unlocking liquidity: Crypto enables assets to be digitised, fractionalised, and easily traded, unlocking large pools of liquidity while improving transparency and accountability. Whether used to raise capital or enhance the liquidity of intangible assets such as art, I foresee a rise in tokenisation projects, with collaborations between asset owners, validators/lawyers, and technologists.

Data as a product: Web3 and blockchain can enable the monetisation of data, allowing data owners to earn money on their data while enabling scientific progress through access to reliable data sets. This is possible through web3 by issuing NFTs to data owners, which can then be accessed and traded via digital currencies, while establishing rules and rights on usage.

The metaverse: The jury is still out on this one. From web2 giants like Facebook to web3 protocols like Sandbox and Decentraland to gaming platforms like Roblox and Fortnite, there are various approaches to the metaverse. Governments and brand owners too are developing their own platforms to engage with customers. While it's difficult to predict which model will succeed or when we will live in the metaverse, expect significant investment in finding the right answers.

Bobby Kakar is a senior leader with experience across fintech start-ups and large multinational and regional organisations such as HSBC, ABN Amro and Abu Dhabi Islamic Bank. Views expressed are his own and do not reflect the newspaper's policy.

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