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10 predictions for 2022 by Henri Arslanian from PwC

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10 Prophecies to look forward to in the year 2022 given by Henri Arslanian.

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2021 is a historic year for crypto with many important milestones. And there is no sign of slowing momentum in 2022!

Following our tradition from 2015, here are my 10 crypto predictions for next year:

Fortune 500 companies in the metaverse

In 2021, the metauniverse concept penetrates the mass flow. While many games and the Metaverse ecosystem have existed over the years, from Second Life to Roblox, Facebook changed its name to Meta in late October 2021, bringing this to the fore. It has focused on the growing Metaverse ecosystem. Like Decentraland and The Sandbox are good examples, each of which has grown rapidly. Expect this to continue into 2022, with each Fortune 500 company trying to develop their own meta-universum strategy.

20 years ago, every company suddenly had to develop its own strategy for e-commerce or online. Now every Fortune 500 company must think about its meta-universe strategy. Expect a consulting firm (like ours) to handle all of this. 2021 is the year the world at large "discovers" the Metaverse. 2022 will be a year that could go mainstream.

Private banks have crypto FOMO

Last year we predicted that many private banks would enter the crypto space in 2021. And they did. By 2021, many private banks, from Morgan Stanley to J.P. Morgan has launched Bitcoin and crypto products for its customers. The products are in response to requests from many family offices and high net worth individuals for digital asset exposure. Moreover, in an environment where cost compression is the norm, this product still offers high fees and high margins to private banks.

But while the availability of such products is now seen as a competitive advantage for these private banks, we will soon be entering an era where the lack of crypto products will be a clear disadvantage. Many large private banks have dismissed Bitcoin as a frivolous asset (not having a crypto product to sell probably doesn't help!). But we should expect most to do 180 and launch crypto offerings by 2022.

El Salvador inspires others?

In 2021, El Salvador became the first country in the world to recognize Bitcoin as legal tender. The positive effects are already visible: According to the President of El Salvador, Naib Bukele, more people there already have Bitcoin wallets than bank accounts, which allows 70% of the population to make transfers without excessive transfer fees of up to 12.5%. Not surprisingly, both the IMF and the World Bank, the two organizations founded during the Bretton Woods Conference in 1944 that introduced the US dollar as the world's reserve currency, vehemently oppose such moves, such as public warnings to Salvador to change course.

Many politicians or politicians in other smaller countries, especially those with de facto dollars or dollars like Panama or those in developing countries like Paraguay, can follow in El Salvador's footsteps. Others may not want Bitcoin, but are interested in other forms of digital currency. For example, Palau has announced that it will consider issuing a government-backed stablecoin, while the Marshall Islands are already seeking their own digital currency. And it often goes beyond emerging markets. For example, a recent survey found that 27% of Americans support converting Bitcoin into legal tender. Expect many other jurisdictions to keep an eye on how things are in El Salvador. They may not always follow in their footsteps and recognize Bitcoin as a legal tender by 2022, but they hope this topic will be debated very actively.

Make or break for Ethereum

Ethereum is the largest smart contract and Layer 1 platform by market cap. However, 2021 exhibits inherited issues, ranging from scalability issues to excessive fees, with average transaction fees ranging from $4 to $70. There is a lot of optimism about Ethereum 2.0 which, combined with recent changes like EIP-1559, has peaked in ETH price from $750 to $4,800 this year. While Ethereum was the only big gig in town during the last big bull market in 2017, there are now many alternatives from Layer 1, from Algorand and Avalanche to Solana and Tezos, that not only offer better scalability, but also come at a cost. which is much lower.

The crypto community is patient and has a very good desire for Ethereum. However, if the upgrade to ETH 2.0 doesn't go according to plan, the network risks losing many of its users who may eventually find that the grass on some other chains may be greener.

Gamers Catalyze the Web 3

Web 1.0 is the static Internet represented by AOL and Netscape. Web 2.0 is a great Internet, but it is controlled by big tech companies like Meta and Google. Web 3.0 is a decentralized and illegitimate Internet where users also have control over their data. The convergence of NFT, DeFi, and Metaverse brings us to the Web 3.0 ecosystem. And the catalyst here could be the gaming industry.

There are more than 2.5 billion players worldwide, and in recent years frustration has grown over the overwhelming control some major gaming companies have, from the inability of these players to own their in-game assets to the fact that they can't own them. . In-game assets lack interoperability with other games.

2021 has shown us the power of DeFi and NFT in gaming, in addition to the power of decentralized sweepstakes models like Axie Infinity and its 2 million monthly active players. With so many new funds focused exclusively on space, Solana's $3.0 million Web 3.0 game fund is a perfect example.

NFT is widely used, but it lacks accounting, tax and legal clarity

In 2021, NFT is in the spotlight, with total sales exceeding $12 billion. Several isolated high-profile sales paved the way, from Beeples' $69 million JPEG to the million-dollar sale of CryptoPunks and Bored Ape Yacht Club NFT. The euphoria surrounding the NFT (and the overwhelming forecast) may subside, but the truth is that the NFT is here to stay. Expect them to become more massive and even invisible with everyday interactions.

We should expect NFT to feature in everything from limited edition sneakers and high-end wallets to tickets and in-game sports collectibles as this environment becomes the standard rather than the exception. The big issue here now passes through the legal, tax, and accounting considerations associated with such an NFT, which are far from clear. What legal considerations relate to intellectual property or consumer rights? From an accounting perspective, do NFTs represent IP licensing rights or intangible assets? What are the tax considerations on income from NFT issuance or ongoing compensation?

 A recent PwC survey found that only 7% of tax authorities worldwide offer any form of tax advice to NFTs. That should change by 2022. These guidelines will be useful not only to tax authorities or regulators, but also to the general public.

All eyes on China and its e-CNY

2021 is an important year for CBDC. Not only have we seen revolutionary wholesale CBDC projects, from the mCBDC project in Hong Kong to the Dunbar project in Singapore, we've also started many retail CBDCs, from eNaira in Nigeria to sand dollars in the Bahamas. But all eyes will be on China in 2022 with the upcoming launch of e-CNY. The country has processed approximately $9.7 billion in CNY electronic transactions under various pilot programs. More than 140 million Chinese already have their e-CNY wallet.

China's recent cryptocurrency ban and the start of the Beijing Winter Olympics in February 2022 paved the way for the launch of e-CNY early next year. This will be a historic moment in the history of money. Centralized Crypto Exchange DEX Competition

As we predicted last year, DeFI continues its rapid growth in 2021, with the total value of illicit companies increasing from just $22 billion at the end of 2020 to more than $250 billion today. DeFi is undoubtedly one of the most exciting areas in finance today, with new offerings ranging from decentralized exchanges and credit to asset management and even insurance offerings increasing every day.

Some of DeFi's functions, such as composing, allow us to rethink financial services with a first-principles approach that we haven't been able to do for decades. And this attracts not only record highs in assets, but above all, talent with highly intelligent minds who are focused on this area. DeFi will not only affect traditional financiers but also centralized exchanges, especially as DEX becomes more user-friendly for trading. Centralized platforms will continue to exist and play a large role, especially as fiat on the road and for newcomers, but they will increasingly need to coexist with DEXs.

US dominates bitcoin mining and helps ESG

As of July 2021, around 65% of global bitcoin mining takes place in China. After the ban, almost all of this activity shifted to countries that were more friendly to bitcoin mining, such as the United States, Russia, Kazakhstan, and Canada. The United States has risen to become the world's largest bitcoin miner, with its share of activity surging from 4% at the end of 2019 to more than 35% after the ban. Given some regulatory uncertainty in countries such as Kazakhstan, we expect the share of US mining to continue to grow in the coming months.

The main benefit here is that Bitcoin will be greener. According to the Bitcoin Mining Council, a higher-end industrial conglomerate in the United States, about 57% of the world's Bitcoin mining is currently powered by renewable energy. Bitcoin mining can ultimately accelerate the growth of such renewable energy, from end buyers to more sustainable production of renewable energy. It can also be helpful in dealing with the looming ESG debate.  Many initially viewed the ban in China as a negative development. This could be one of the biggest positive catalysts in our industry. Expect positive effects in 2022.

Crypto M&A turns crypto unicorns into octopuses

As we predicted last year, 2021 is a record year for crypto M&A. According to multiple data sources, crypto M&A is worth more than $25 billion in 2021. We should expect this to continue into 2022, especially among crypto unicorns who are increasingly turning into crypto octopuses, spending some of their profits in bull markets, and acquiring or investing in companies that offer additional services on top of their current offerings.

In particular, companies that provide access to commercial communities, ecosystems, content and/or data should be attractive targets for acquiring some of these crypto platforms. The same applies to companies that are regulated in key markets and thus enable faster access and transition to market strategies. We should also expect some of the bigger financial services companies, especially those late in their crypto journey, to look to potential acquisitions.

In 2022, the crypto M&A party is far from over!

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