Crypto Market Decay Drives Crypto Investment and Adoption
According to a report released Tuesday by KPMG, venture capital firms have committed $14.2 billion in cryptocurrency-related investments during the first quarter of 2022.
During this time, the four largest investors were the German trade republic ($1.1 billion), digital asset custodian platform Fireblocks ($550 million), FTX bitcoin exchange ($500 million) and Consensys, a firm that builds Ethereum software .
The report’s authors, Anton Ruddenklau, global head of fintech for KPMG, and his teams, noted that investment data for the first quarter of 2022 is already more than double what it was last year.
The study underscores the growing maturity of the space as well as the diversity of technologies and solutions attracting capital as a result.
What is behind this maturity?
Global expansion
Cryptocurrency is banned in China, but the tables have turned early for the rest of the world.
KPMG said underdeveloped markets such as Africa’s would potentially generate significant growth. This is explained by Binance’s latest attempt to launch a digital hub in Nigeria.
Last week, the leading stock exchange was said to be discussing this new partnership with the West African nation. The purpose is to achieve steady economic growth through digital innovation.
The growing interest in the use of cryptocurrencies is also driven by the acceptance of Bitcoin as legal tender in El Salvador and the Central African Republic, according to the report.
On the other hand, the use of cryptocurrencies is driven by mandatory circumstances.
Iran and Russia, both of which have been subject to severe sanctions, clearly demonstrate this point. Iran is moving forward with the use of cryptocurrency for imports while Russia has recently approved the use of cryptocurrency payments in international trade.
In March, there were rumors that Russia was considering accepting Bitcoin as payment for oil and gas.
The Bank of Russia then changed to enable cross-border payments in crypto. Iran, on the other hand, legalized the use of Bitcoin and alternatives for imports.
In addition to this, Fatemi Amin, who is the Minister of Industry, Mines and Trade, presented a set of regulations for energy supply and trade.
Cautious approach from regulators
Unlike China, which had previously banned crypto trading, the rest of the world has been extremely cautious about crypto. Up to this point, it appears that jurisdictions are inclined to embrace the technical aspect of the market while protecting consumers.
Despite the Russian central bank relying on crypto to handle cross-border payments, the authorities prefer to use stablecoin and digital ruble to promote international transactions.
A local news outlet reported that the country is in talks with a number of countries to explore stablecoin settlements for cross-border payments. In other words, cryptocurrency is a temporary solution to avoid sanctions.
Russia is also looking at a stable coin based on state currencies – a digital ruble. This type of approach is becoming increasingly common among global governments.
China has developed an advanced digital yuan and put it into experiments. In the meantime, the country seeks to expand agreements for the purchase of Russian raw materials such as gas and oil.
This is clearly not a positive scenario for the majority of EU countries, especially as winter approaches.
Central bankers from the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) spoke in favor of the central bank’s digital currency and how it could establish a diverse monetary ecosystem by implementing the technical capabilities of cryptocurrencies.
Things are blowing hot and cold on the side of the US and the Federal Reverse (Fed).
There hasn’t been much progress since Jerome Powell’s statement to explore the digital dollar, and the cryptosphere is seeing China take the lead in its CBDC’s development.
