2020 was a turbulent but very successful year for digital currencies and protocols around Bitcoin, Ethereum and Co.
The overall value of the crypto market has recorded a steep increase and this despite or even because of the global COVID pandemic.
1. Digital central bank currencies (CBDC`s) are emerging.
The Bank for International Settlements (BIS) recently released a report showing that 80% of the world`s central banks are working on some form of digital currency.
This process will continue to intensify in 2021, driven by the steady decline in the use of cash and the ongoing digitalization of the economy.
In this context, combating money laundering and the financing of terrorism are among the purposes of issuing a digital central bank currency.
To achieve these goals, a digital central bank currency must be convertible, easily accessible, and inexpensive. The underlying system should be resilient, available 24/7, flexible, and secure for the general public.
A Digital Central Bank Currency has the ability to influence monetary policy much more than cash. Think, for example, of varying real-time taxation for individuals or companies. It also allows for varying interest rates and creates general transparency of all money flows.
Digital central bank currencies will become a reality in 2021.
2. Unregulated coins are getting in trouble
A stablecoin is the class of cryptocurrencies that attempts to provide price stability by being tied to an external value such as the U.S. dollar or gold.
Stablecoins currently act as a sort of lifeline for many citizens in countries with hyperinflation or strict currency controls.
However, unregulated stablecoins such as Tether (1 Tether = 1 US Dollar) are experiencing increasing regulatory pressure from the US government.
As a result, a new regulatory draft calls for a banking license for stablecoin issuers like Tether.
Other cryptocurrencies such as Ripple are also facing increasingly stringent controls. The U.S. Securities and Exchange Commission classifies Ripple as a security, not a currency. If a coin fails to register and regulate, but is classified as a security by the financial authority, this is a violation of the law. Ripple will not be the only coin to come under regulatory investigation this year.
3. More mainstream acceptance
Last year has already seen a remarkable development in Bitcoin adoption. Prominent fintech companies such as Square and MicroStrategy invested a large part of their cash reserves in Bitcoin. In addition, payment service provider PayPal has allowed its more than 300 million users to buy and store Bitcoin.
In 2021, we will likely see an expansion of this mainstream demand. One reason for this is the steady devaluation of sovereign currencies such as the U.S. dollar.
4. The breakthrough of security tokens
Security tokens cannot get a lawsuit like Ripple got, because they are regulated and approved by a financial market regulator. Investors get a chance through Security Tokens to become a shareholder of a company, a property or a painting. These shares can be divided into very small units (coins/tokens) and are easily transferable. Currently, more than 20 companies are working on setting up special regulated exchanges to make security tokens tradable, including the SIX exchange in Switzerland. A large number of these exchanges will be launched in 2021 and thus create an upswing in the field of security tokens.