The past year has seen many challenges for crypto – many of which have been pivotal for the industry. Doubts and concerns followed the collapse of Celsius, Voyager, and FTX, causing increased scrutiny from regulators and skepticism from public and media on the long-term viability of the industry. Significant price leg down after a record high in 2021 added to the negative sentiment.
Although many see these events as a looming sign of the industry’s descent, the virtual asset industry is still in its early stages of development. The manner in which it overcomes these challenges and harnesses growth opportunities to become increasingly user-focused will define its potential and ultimate success.
Among several comparisons of recent market challenges to the infamous “Lehman moment” or the dotcom bubble crash in 2000, there are two facts that remain true. First, such events served as cleansing moments to the respective industries; and second, this serves as proof that the crypto industry often faces many of the same challenges that traditional finance did in its early development stages.
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One thing is clear: the resilience and tenacity that the industry showed in 2022 give reasons to be optimistic about crypto’s recovery and further development.
Adoption rates as the key measure of success
Adoption rate is one of the primary metrics used by the industry to measure success. Despite the numerous challenges in 2022, businesses and users all over the world kept embracing blockchain technology.
Emerging markets have taken the lead in retail adoption, and numerous well-known companies have benefited from implementing blockchain-powered solutions this year, including KPMG, JPMorgan, Rakuten, CVSHealth, Tencent, Baidu, Tesla, Cloudfare, PayPal, American Express, Accenture, Christie’s, Nasdaq, McDonald’s, Google Cloud, Mastercard, Sony, and Nike. Some of the biggest names in finance, such as Blackrock and Fidelity, remain committed to the blockchain space in 2022.
More and more people are joining the crypto revolution to embrace freedom and flexibility in the use of crypto for everyday purchases. In line with this trend, payment companies are developing crypto linked cards that allow consumers to use their cryptocurrency in transactions with merchants around the world. This is part of the journey where the tremendous potential of crypto demonstrates mainstream adoption.
The decline in confidence in the cryptocurrency sector caused by this year’s crises, however, may hinder the pace of widespread adoption. At moments like this, education about virtual assets becomes even more important, as closing the knowledge gap on crypto assets and basic crypto-best principles will primarily protect users and eventually result in higher adoption rates.
It is important to differentiate isolated events of shenanigans associated with bad actors, which take place in every sector including traditional finance, from the general health of the sector. For instance, informed public will be able to differentiate events such as a Barings collapse or Madoff episode from the practice and general health of the financial services sector.
With the MENA region ramping up virtual asset education and government initiatives that enabled innovation in the industry, supported by the progressive regulations being passed in places like UAE and Bahrain, the region remains an important epicenter of crypto adoption. Ultimately, future growth in virtual asset trading and Web3 products supports innovation and job growth and contributes to the economic competitiveness of the region in the long term.
Increased focus on compliance, security, and innovation
The crypto industry advanced significantly in 2022 in yet another area that is essential to both widespread adoption and user security – regulatory compliance. Further engagement with regulators will be key for 2023, with efforts primarily focused on consumer protection.
Certainly, the regulators will be increasingly skeptical, and re-establishing trust with the public will be a key priority. Effective engagement and collaboration on building an industry based on trust and upholding high standards will provide the building blocks needed to develop a sustainable blockchain industry.
To capitalise on the opportunities that these challenges present, increasing transparency, ensuring compliance, and enhancing security should be at the forefront of the industry players’ priorities. The sector must be more receptive to regulatory laws that guarantee user protection, such as those that instruct centralized exchanges on custody needs, asset marketing, and risk evaluation.
Above all, this year should see the industry being driven by a long-term vision and a set of fundamental values which will help to maintain the focus on building despite any potential fear, uncertainty, and doubt. Despite the lingering effects of the FTX collapse within the industry, cryptocurrency prices remain remarkably stable.
Regarding market health, every bear market has improved compared to the previous one. The challenge now lies in proving to regulators, the public, and media that prominent bad actors do not dominate the blockchain space. If key industry players concentrate their effort on putting users first, the industry will undoubtedly emerge stronger than before.
What’s next?
As blockchain-based innovation and investment in virtual asset education and upskilling grows in the MENA region, we can expect businesses and financial institutions to continue to increase the integration of Web3. Binance’s recent partnerships with Majid Al Futtaim, Jebel Ali Resorts, Palazzo Versace in the UAE, and Eazy Pay in Bahrain show the appetite for utilising digital assets to provide enhanced customer experience, flexible payment solutions and optimise business operations.
Growth in crypto adoption expanded beyond retail, with institutions and governments launching initiatives in support of digital asset space. UAE regulators are increasingly integrating blockchain-powered solutions to streamline judicial processes, among which are the Dubai International Financial Centre (DIFC) Courts’ blockchain initiative and the recent integration of blockchain technology in ADGM Courts.
The region remains critical for the development of the global crypto ecosystem due to its continuous efforts to build a stable regulatory environment that will enhance user protection and market security and play an essential role in gaining back trust in the industry and achieving long-term growth.
Despite the numerous challenges that the digital assets industry faced in 2022, it managed to create multiple products that deliver unique value to users – from NFTs and smart contracts to decentralised finance (DeFi) applications and GameFi – and achieve significant milestones that were unimaginable two years ago.
Some of the recent developments in the digital asset space include crypto mobile top-ups, colorblind trading solutions and the launch of our own crypto debit card, which enables customers to spend crypto directly from their crypto wallet with either Visa or Mastercard-supported merchants. The next crypto bull market will likely come from innovation to deliver unique utility with these products.
It is unknown how much time such development will require, but in the meantime, players in the digital asset space must focus on building, innovating, putting users first, and further enhancing security, transparency, and compliance.
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