The year your grandpa bought BitcoinDecember 22, 2021 | By Sophie Hares
On its face, 2021 might not have seemed like the year cryptocurrency got serious.
After all, we had Elon Musk sending Dogecoin (a digital currency originally created as a joke) on a roller coaster ride with his tweets and competing memes about which TV cast, “The Sopranos” or “The Office,” would be more savvy crypto investors.
Yet amid the hysteria (and hilarity), this was the year cryptocurrency started taking big steps toward the mainstream.
In February, Bank of New York Mellon became the first global bank to begin helping clients hold, transfer and issue digital currencies. Tesla started (then stopped) accepting Bitcoin as payment for its electric cars. And Gemini — a platform for all things crypto — teamed up with Mastercard to create a credit card that provides cryptocurrency as real-time rewards.
There are warning signs, with regulators taking a closer look at crypto and plenty of market watchers warning of a bubble.
But this may just be the start of the concepts that underpin this technology. What more traditional institutions are discovering is that crypto’s potential may not lie so much in the coins themselves, but in blockchain, the underlying digital ledger technology that makes crypto work. Through digitally recorded transactions, blockchain is creating new marketplaces that could change how people shop, bank and do business.
As crypto and blockchain tech continue to develop, 2022 should be another year when these technologies continue grabbing headlines.
To see where crypto might be heading next, let’s look back at the biggest trends in crypto this past year:
Stablecoins gain steam. Central bank digital currencies next?
Cryptocurrency’s move into everyday purchases is most likely to come from a newer generation of less volatile and more regulated cryptocurrencies called stablecoins. These tokens are typically pegged to assets like the U.S. dollar. Though often used to switch from one cryptocurrency to another today, stablecoins such as USDC and Pax Dollar could become another choice for transactions because they are more stable stores of value than cryptocurrencies. The market for stablecoins this year rocketed past $150 billion. Banks like New York-based Signature are starting to take deposits in stablecoins, and Facebook parent company Meta is testing its own stablecoin with a pilot focused on remittances from the U.S. to Guatemala.
Of course all this market movement has attracted the attention of regulators, many of whom are worried that some stablecoins don’t have adequate consumer protections and could put the larger economy at risk. The European Central Bank said earlier this year that stablecoin issuers should be required to keep significant cash reserves and believes it should have veto power over stablecoins in the eurozone.
Meme lords and social media companies aren’t the only delving into this market Regulators have accelerated development of their own digital currencies issued by their central banks. Enter central bank digital currencies. Backed by government assets in the same way as regular notes and coins, central bank digital currencies can offer transactions and help countries crack down on tax evasion and money laundering.
CBDCs can also bring more unbanked people into the digital economy while making it easier to disburse benefits. These tokens could also give central banks a way to maintain their grip on the integrity and stability of their respective economies.
China, Sweden and Singapore are among those currently piloting central bank digital currencies, according to the Atlantic Council’s CBDC tracker. The Bahamas’ Sand Dollar, Nigeria’s eNaira and the Eastern Caribbean Central Bank’s DCash are already available to institutions and individuals to transfer money and pay for goods and services.
Beeple, apes and NFTs
This year crypto also got serious in a surprising arena: the art and collectibles world. Auction house Christie’s ignited frenzied interest in non-fungible tokens when it sold artist Beeple’s digital creation for $69.3 million, and now everyone from your mom to major brands is entering the fray.
Tweets, videos and memes are just a few of the assets that are being converted into digital tokens, putting real-world value on “one-of-a-kind” digital collectibles. So far this year, investors have shelled out $13 billion for the digital assets that only exist on the blockchain. For example, crypto startup Mintable is helping people “mint” their creations and convert them into NFTs, which are traded on specialized cryptocurrency marketplaces.
Popular NFTs are fast becoming more than an asset and evolving into entire communities. The Bored Ape Yacht Club started with its cartoon simian NFTs and now sells merchandise and hosts real-world member parties.
Brands from Coca-Cola to fashion house Dolce & Gabbana are trying out their own NFTs, but the jury remains out on the future of endeavors such as Bored Apes. Regardless, the trend will have a lasting effect on creative communities as artists use smart contract functions that can be built into NFTs to change the way they sell and get paid for their works.
In the coming year, expect to see even more innovations in digital currency. A year ago, you might’ve never heard of Dogecoin. Today the global crypto market capitalization tops $2 trillion. That’s no joke.
A new survey from the Bank for International Settlements on the development of central bank digital currencies shows that central banks representing about a fifth of the world’s population would introduce a general-purpose CBDC in the next three years. By the end of 2021, 23 countries will have launched or are piloting CBDCs, including Africa’s largest economy, Nigeria.
Bank of New York Mellon, America’s oldest continuously operating bank, says it will begin helping clients hold, transfer and issue digital assets, citing growing demand from its customers and better regulatory clarity.
An online Christie’s auction netted $69 million for a digital artwork by Beeple. It was the first non-fungible token artwork to be sold at a major auction house, according to Christie’s. It ignited a frenzy of interest in NFTs. Two weeks later, an NFT of the first tweet by Twitter CEO Jack Dorsey fetched $2.9 million, with the new owner comparing the “true value of this tweet” to the Mona Lisa.
Coinbase becomes the first major cryptocurrency company to list its shares on a U.S. stock exchange, ending the trading day on Nasdaq at $328.28, with a value of $85.7 billion. That’s more than 10 times its valuation as a private company.
Elon Musk, the self-proclaimed “Dogefather” for his praise of the Dogecoin cryptocurrency hosts “Saturday Night Live.” The value of Dogecoin drops nearly 30% during his appearance.
Facebook rebrands its controversial digital currency initiative Libra as Diem and promises a pilot of its stablecoin pegged to the U.S. dollar. It launches a small pilot of its Novi digital wallet in October for some users in Guatemala and the U.S.
The U.S. Justice Department announces it has traced and recovered more 63.7 of the 75 Bitcoins that Colonial Pipeline had paid to hackers in the ransomware attack the previous month that had caused fuel shortages and a spike in gas prices.
El Salvador – home to “Bitcoin Beach,” a surf resort where crypto is the coin of the realm – makes Bitcoin legal tender as a way to boost financial inclusion. The IMF opposes the move and strongly cautions for more regulation.
China, deep into testing its digital yuan, effectively bans crypto by deeming virtual-currency related business activities “illegal financial activities.” It had already banned trading cryptocurrency in China, but trading on foreign exchanges had continued.