Crypto and Blockchain Predictions for 2023

To say that 2022 has been a volatile year for the blockchain and cryptoasset space would be an understatement. From the dramatic drop in token prices, increased volatility in trading patterns, collapse in NFT values ​​and trading volume, failure of several centralized crypto firms, and – finally – the spectacular meltdown of FTX capped what has arguably been the worst year for crypto since the hit the mainstream financial markets. Beneath the surface, however, the vast majority of problems, collapses and bankruptcies were not caused by underlying issues or problems with either blockchain technology or the cryptoassets themselves. There is actually a silver lining that can be gleaned from the otherwise sad year that was 2022.

Financial instruments, crypto or not, must have a business use case and fundamental economic value in order to be accurately traded, used and valued by the marketplace. What was clearly demonstrated during 2022 was that 1) excessive leverage and margin activity had entered the crypto space, 2) this influx of capital artificially raised the valuation of dubious projects, 3), rapid increases in investor demand led to overly optimistic projections and promises . , and 4) shakily constructed business models and practices were able to avoid scrutiny and due diligence. FTX, discussed constantly since November 2022, was the epitome of these trends; leverage, excessive risk-taking and fraudulent activity coalesced to lead to billions in investor losses, arrests and what is sure to be a crypto audit reckoning.

That said, 2022 is quickly coming to an end, so let’s take a look at some trends and predictions that could dominate 2023.

Crypto audit rules will finally evolve. As has been proven, after being debated for years, the current state of accounting and auditing rules is simply not up to the task of auditing or providing attestation services to firms operating in the crypto space. Some firms have publicly withdrawn from offering crypto services for the time being, and other firms that have been marketed as industry leaders are now under intense scrutiny from both the market and regulators.

Proof-of-Reserves, recently offered as an answer to those seeking more transparency and comparability for crypto firms, has also suffered reputational damage as it has begun to raise questions about what these commitments entail. The specific name or title of a crypto audit or attestation process is not as important as the mechanics of how these engagements will work. With the Financial Accounting Standards Board (FASB) finally working on crypto-specific accounting standards, this much is certain; accounting and auditing for crypto is absolutely top notch.

Crypto applications are getting boring. As glittering as trading volatility, skyrocketing asset prices and a plethora of new tokenized products are, the reality is that such activity is neither confidence-inspiring for users, nor activity that will be viewed favorably by regulators, insurers and more conservative investors. . Especially after the numerous collapses and fraudulent activities that occurred during the recently ended period of market volatility, the trend for cryptoassets is almost guaranteed to become duller.

Tokenized assets and blockchain-based applications are already exciting enough without the constant need to increase price action and price volatility. With enterprise adoptions of blockchain and tokenized assets continuing to accelerate, even in the face of declining crypto asset prices over the past year, there is no need for investors and developers to focus solely on price speculation. Tokenized ownership, control, and traceability of information related to healthcare and education alone—not normally seen as exciting as crypto trading patterns—has the potential to deliver fundamental and dramatic changes to large parts of the American economy.

Boring doesn’t have to mean low impact, and 2023 looks like the year for boring applications to take market leadership.

Crypto regulation is coming. With the dozens of proposed bills, laws and legislation that have been introduced, debated and debated in both houses of the US Congress, not to mention the efforts and statements that have been made from the White House and the speculation from the Securities and Exchange Commission, should This does not come as a surprise. After such volatility and spectacular collapse of several organizations during 2022, not to mention the political contributions traced back to FTX, the pressure is on organizations, regulators and policy makers to write and implement some kind of regulation.

The main point that needs to be discussed and understood as regulatory conversations progress is that there is a simultaneous need for regulators to be seen as taking action to address market failures, but that they must do so without inadvertently crushing innovation in the space. A fine line to walk to be sure, and an even finer line since regulators receiving input from industry players – another consequence of the collapse of FTX – will be watched for at least the foreseeable future. Effective regulation is good for industries, regardless of the specifics, as it allows for more transparency, reportability, comparability and allows investors and regulators to weed out bad actors.

A critical question will be how not to let the pendulum swing too far to the punitive and restrictive side; that is why market input is so critical.

The past year was definitely a rough one for the crypto asset industry, ending with what looks like a massive scam being uncovered in the form of FTX. Out of any market collapse, however, there are opportunities to build a better, more sustainable and more transparent market; it looks like that will be the case for crypto in 2023.