Crypto 2022: The New Normal in Finance

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The turn of the calendar year is a privileged moment to reflect on the previous one and anticipate the next one.

While the sudden and remarkable explosion of non-fungible tokens (NFTs) in 2021 presented another mainstream application for blockchain, the past year in crypto has largely been marked by steady growth and maturation in the conversation around new use cases and benefits of blockchain and crypto. The emergence of new central bank digital currency (CBDC) projects, deepening policy and regulatory discussions, and wider adoption of crypto by traditional financial institutions have all signaled the technology’s continued growth within traditional finance.

So what does the next twelve months have in store for us? According to Ripple’s management, 2022 will feature a steady pace of new entrants and applications, increased utility, and wider adoption worldwide for blockchain and cryptocurrency innovations.

Explosive growth in crypto payments

The persistent and global nature of the pandemic continues to highlight the inefficiencies of domestic and cross-border payment systems around the world. This situation was exacerbated as remittances to low- and middle-income countries returned to growth in 2021, putting pressure on inefficient cross-border payment systems.

Brooks Entwistle, Managing Director of APAC & MENA, highlights the multiple CBDC projects from the past year and their connection to national real-time payment systems that are motivated to help improve inadequate payment rails.

He believes this has paved the way for even more crypto efforts to kick off in 2022 and better meet this rapidly growing demand. There is strong potential for new CBDC initiatives, increased investment and activity from crypto-based payment innovators, and collaboration between traditional financial institutions and crypto companies.

In general, Entwistle expects renewed interest in real-world applications and tangible business outcomes, all of which could lead to even greater growth for RippleNet’s On-Demand Liquidity (ODL) solution in the region.

“While remittances will continue to be a key use case, we can expect other applications to take center stage, such as trade flow or cash management,” said Entwistle.

NFTs are going mainstream

The market and excitement around NFTs quickly peaked in 2021, with total sales expected to exceed $17 billion by the end of the year.

For some in the crypto space, this mainstream adoption of NFTs demonstrated in a new way that blockchain and crypto have commercial utility and provided an additional beachhead on which efforts like the $250 million Creator Fund dollars from Ripple can create new features and community.

According to CTO David Schwartz, the key to NFT’s longevity will be to “create a seamless user experience for mainstream consumers and retailers.” There is no doubt that innovation in this space will thrive, but for NFT companies to succeed, infrastructure must support consumer and creator demand.

Monica Long, CEO of RippleX, believes that innovation in other areas like DeFi (decentralized finance) will also help propel the growth of NFTs beyond just collectibles: “The ability to buy, sell , store or transfer an NFT from a wallet attached to that identity, then access it seamlessly in another way, buyers and sellers can confidently verify creators and their creations.

Eventually, says RippleNet Managing Director Asheesh Birla, these NFT use cases that combine aspects of community, access and accreditation will be the ones that will be adopted by the mainstream.

Regulators step up

Driven by the growing popularity of NFTs, CBDCs and the interest of traditional financial institutions in crypto, regulators will come into more prominence in 2022. Although there has been increased activity over the past year , monitoring remains uneven across countries and regions.

Important efforts such as the European Union Regulation on Crypto Asset Markets (MiCA) are expected to progress in 2022 (although it will not come into force immediately). According to Sendi Young, Managing Director for Europe, this increase in regulation plays a vital role in giving companies the confidence to enter the space or partner with crypto providers: “Regulation enables nascent technologies to become the new normal”.

General Counsel Stu Alderoty also predicts that at least one country will appoint a crypto-specific regulator within the next year, hoping that if the US has fallen behind the rest of the world in of crypto regulation, they will be able to turn the tide in 2022. He sees crypto regulation as key to a region’s ability to gain an innovative economic center – a leadership position that the United States could lose s neglect to establish a constructive cryptography policy. But he has noticed a growing level of conversation and attention among policy makers, and hopes they will look into the space to provide some clarity over the next twelve months.

A multi-channel future

Interoperability is also a common theme for 2022 within Ripple’s leadership team, particularly in its ability to help achieve more mainstream adoption and applications for crypto.

Long is adamant that the future of crypto is a multi-chain world. Ethereum – a popular blockchain for creating and consuming NFTs – has recently encountered scaling issues. For Long, these technical challenges highlight the need for cross-chain interoperability to handle growing developer demand.

“Developers are looking for the ability to build bridges between networks to meet their specific use cases,” she said. “Achieving this interoperability will be key to breaking down barriers to wider crypto adoption.”

The need for interoperability is echoed by Birla, who predicts that if decentralized exchanges can use cross-chain non-custodial wallets, they will overtake centralized exchanges for overall market share by 2022.

Ultimately, 2022 will be defined by consumer expansion and improved customer experience. The overlapping efforts of regulators, central banks, traditional financial institutions, and crypto innovators will all build on the past year as an inflection point that will drive the industry forward. Clients and consumers will benefit from improved infrastructure, user experience, regulatory clarity, and interoperability as crypto becomes an essential part of the new normal in finance.

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