Collision of Realms: The Growth of Political-Consumer-Digital Alliances
In the ever-evolving world of finance, the adoption and development of digital currencies and cryptocurrencies are gathering pace. More than 80 countries are currently researching, developing, piloting, or launching Central Bank Digital Currencies (CBDCs), signalling a significant shift in the global financial landscape.
One of the most prominent developments in the cryptocurrency sphere is the proliferation of mainstream financial institution products and services. Reed Luhtanen, Executive Director of the U.S. Faster Payments Council, has noted that this trend demonstrates consumer demand. For instance, Gemini, a leading cryptocurrency exchange, launched a cryptocurrency credit card in January 2021, allowing users to earn rewards in cryptocurrency.
However, the cryptocurrency market is not without its challenges. Hackers stole up to $1.57 billion of cryptocurrency through the first four months of 2022, already surpassing 2021's total value hacked. Nearly 97% of all cryptocurrency hacks that occurred in Q1 of 2022 were on Decentralised Finance (DeFi) protocols.
Despite these security concerns, institutional investment in cryptocurrency continues to grow. In January 2022, JPMC invested in Viva Wallet, a European cloud-based payments fintech company. Fintech giant FIS partners with NYDIG to provide greater accessibility to Bitcoin for its clients. Goldman offered its first Bitcoin-backed loan in April 2022.
Regulatory bodies are also taking notice, with France financial regulators granting Binance a digital asset service provider license in May 2022. The Australian Prudential Regulation Authority (APRA) released risk management expectations for regulated institutions handling crypto-assets in April 2022.
The United States has seen a decline in its crypto adoption ranking, moving from 6th to 8th place as of late April 2022. However, nearly 25 million Americans own Bitcoin, according to recent data. The US Treasury has also taken action against Russian cryptocurrency miners suspected of evading sanctions, designating a miner and its 10 subsidiaries as Specially Designated Nationals.
In a move that could further legitimise cryptocurrency, the Central African Republic adopted Bitcoin as a legal tender in April 2022, joining El Salvador in this groundbreaking move. Bill Gates, founder of Microsoft, has referred to Bitcoin as a technological tour de force.
As the world continues to grapple with the implications of digital currencies and cryptocurrencies, one thing is clear: these innovative financial technologies are here to stay. Erik Voorhees, founder and CEO of ShapeShift, aptly described Bitcoin as the Wild West of finance. Naval Ravikant, co-founder and former CEO of AngelList, noted that it's probably easier and cheaper to counterfeit hundred-dollar bills than it is to counterfeit Bitcoin. Bill Miller, an investor, stated that Bitcoin is the only economic entity where supply isn't affected by demand.
The strategic decision by the US Treasury to target Russian cryptocurrency miners underscores the influence digital assets have in the hands of consumers, institutions, and governments. As the world navigates this new financial frontier, it's clear that the future of money is digital.
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