Cryptocurrency and blockchain are revolutionizing the exchange of value – as the internet did for the exchange of information – however the need for industry reform is clear.
Cryptocurrency’s use cases vary worldwide with more uses possible with emerging web3 technologies.
The future of crypto markets can’t be discussed without addressing the collapse of the crypto exchange FTX, whose failure was defined by broader organizational and economic considerations.
While the cryptocurrency industry has experienced explosive growth in the past decade, it has had its fair share of setbacks and scandals, like any new technology. Every time crypto is shaken, we have to reiterate why it is here, what we proponents of cryptocurrency believe and the purpose of what we’re building.
In the wake of FTX’s collapse – the company that formerly operated a cryptocurrency exchange and crypto hedge fund – there is an opportunity for institutions to come together to put in place reforms, policies and partnerships that build trust in crypto markets and pave the way for a global economy built on the blockchain.
The internet of value
Crypto and blockchain are revolutionizing the exchange of value, much like the internet did for the exchange of information and the journey will be very much the same. The cryptocurrency movement was created from the ashes of the 2008 financial crisis with the belief that the financial system should be transformed to work better for everyone.
Through Chainalysis’s research team, we’ve spent a lot of time analyzing how ordinary people and businesses use cryptocurrencies. We’ve found that use cases vary worldwide and span gaming, art and even fundraising for war relief, particularly over the past year as support poured out for the Ukrainian people. In addition, crypto offers the ability to transfer funds instantly across borders without the bureaucratic hurdles of traditional banking.
Beyond these applications, there are emerging web3 technologies that have the potential to:
Unlock new use cases in finance that aren’t currently possible due to the illiquidity of traditional assets.
Increase transparency and foster more direct relationships between sellers and customers.
Bring decentralization to the business world by enabling community ownership.
It’s times like these – bear markets – when improvements and innovations in crypto are built. Cryptocurrencies have already opened up new markets and made the global economy bigger, fairer and more deeply integrated. And we’ve only seen the beginning of what these transformative technologies have to offer.
Streaming movies is a relatively recent addition to the internet but sharing recipes has been possible for decades. Similarly, the maturation of web3 will take some time. New systems, bolstered by web3 technologies, have the unique opportunity to improve the lives of people left behind by our current financial infrastructure and formulate a more equitable future.
“This inflexion point for crypto comes as our broader economic systems face headwinds and uncertainty”.
— Michael Gronager, Chief Executive Officer, Chainalysis
An inflexion point
Right now, however, any discussion of the future of crypto requires addressing the collapse of FTX.
FTX was not a crypto failure; it was the failure of an organization defined by a lack of transparency and closely held, centralized and irresponsible power. This scenario is not unique to crypto and has happened in tech, finance and almost every industry. Unfortunately, the FTX case had outsized ramifications, with many individual investors and companies devastatingly impacted.
This inflexion point for crypto comes as our broader economic systems face headwinds and uncertainty. The crypto industry and financial sector, more broadly, must use this opportunity to take stock of our values and ensure we are advocating for a better, safer financial ecosystem without limiting innovation.
The existing financial system isn’t working for most people; globally, 1.4 billion people remain unbanked. The macroeconomic landscape only proves that there is a huge demand for new models of ownership in the economy.
Transparency is key for cryptocurrency
There is an imperative for the cryptocurrency industry to harness blockchain’s inherent transparency to build an economic system that holds itself to a higher standard than traditional finance. We’ve already proven that using crypto to launder money is an easy way to get caught.
Research by Chainalysis has shown that, in 2021, less than 1% of cryptocurrency transactions had ties to illicit activity. With the right data, tools, guidance and partnerships, the cryptocurrency industry can hold its businesses and people accountable to protect consumers by design.
No other sector of the crypto ecosystem embodies transparency more than “decentralized finance” (DeFi), where all transactions are visible and the code behind protocols is open for all to see. The entire crypto industry should strive for this level of transparency and already, we’ve seen a wide range of valuable use cases.
There is an opportunity for the crypto and broader financial industry and its governing bodies globally to collaborate and work towards standards of conduct, including reporting on reserves and other disclosures to ensure that the industry is doing its utmost to safeguard consumers.
How is the World Economic Forum promoting the responsible use of blockchain?
Regulators have the challenge and sometimes competing goals of keeping consumers safe while supporting the future of innovation. Striking the appropriate balance between consumer protection and innovation will require close collaboration between the industry and policymakers across jurisdictions due to the borderless nature of crypto.
Chainalysis will continue to advocate for regulatory frameworks that protect consumers and empower innovators by providing access to data, expert analysis and tools that contribute to a better understanding of recent events and their ongoing implications in the market.
As with any new technology, crypto has attracted criminals and fraudsters but they are not representative of the industry and shouldn’t be allowed to define it. Crypto’s technical foundation is open and transparent.
As we continue to innovate and redesign new frameworks that address systemic deficiencies, crypto is crucial for ushering in the next phase of the internet of value for more financial freedom with less risk.
- SEO Powered Content & PR Distribution. Get Amplified Today.
- Platoblockchain. Web3 Metaverse Intelligence. Knowledge Amplified. Access Here.
- Source: https://www.fintechnews.org/why-we-still-need-cryptocurrency-for-an-internet-of-value/