What happened in crypto in 2019?
After a busy year in crypto, 11:FS co-founder Simon Taylor checks in on his 2019 predictions to see what he got right and what he missed.
TL;DR: Libra happened (but still might not happen), DLT came back in a big way and regulators started to apply 20th century regulation to 21st century technology. Let’s dig into it...
Prediction 1: the crypto part of “crypto” becomes much more important than the asset or currency part
Libra really screwed me on this one.
As the year began, privacy preserving crypto seemed like it would dominate the conversation in 2019. And in its own way, privacy has become a much bigger concern.
But then, bang! The Libra hearings started, and now currency and assets are an even bigger topic.
We’ve still got a ways to go; maybe I was a bit early on this one
To cut myself a little slack, the fear around Libra isn’t just about these factors. Wherever Facebook goes, privacy is bound to be a hot-button issue. Libra’s so scary to many stakeholders because it raises anxieties about both privacy and currency/assets.
If we step out of the big F’s long shadow, we can see that plenty of actors still prioritised privacy in 2019. The discussion revolves around ideas of identity management that are either centralised – top-down identity management in the vein of the Indian Aadhar – or decentralised – I own my own data, but you can request access. Companies like Sovrin and Evernym are also pushing things forward around the world.
So there’s been progress, but Libra has made it a lot less visible. We’ve still got a ways to go; maybe I was a bit early on this one.
Prediction 2: DLT makes a comeback
Bullseye!
In 2019, I wrote that the DLT POCs that had first been teased in 2015 were quietly progressing. “Volume is coming,” I predicted, for everything from syndicated loans to foreign exchange.
Now, those projects have become pilots. They’re getting volume. They’re officially becoming A Thing.
[DLT projects] are grabbing headlines. It’s all happening
HSBC is relying on DLT to settle foreign exchange transactions.
Natwest is using it to make homebuying process mobile.
Marco Polo are bringing it to companies like Bank of America and BNY Mellon.
Santander is processing a bond and managing its full lifecycle on it. And their Head of Digital Investment Banking is being open about what they’re doing and what it shows.
These developments are grabbing headlines. It’s all happening.
This year, the conversation moved on. Companies like Swiss Exchange operator SIX aren’t integrating into back office systems. Calling it a “get off the planet and get your ass to Mars” strategy doesn’t quite cover it – they’re creating entirely new universes. At a time when many incumbent banks are looking for their own Marcus, I wouldn’t be surprised to see them turning to DLT for a solution.
Prediction 3: institutions dip a toe in the water as infrastructure build-out hardens
This one came true in multiple ways.
It’s true that larger institutions have an appetite for digital assets: why wouldn’t they want to keep their capital moving instead of parking it in one place for a couple of days? Blockchain offers the opportunity for greater efficiency – but these companies still need to work out the implementation first.
As they’re doing this work, the little guys are stepping up. I said as much last year: “I think you will see smaller specialists buy-side firms professionalise crypto and start to even out some of the volatility, and long-term that's a very good thing”.
That’s the prediction that really came true in 2019. Companies like Solidus Labs are small, but they come from financial backgrounds and have gone into crypto businesses that need to be built.
Prediction 4: regulatory clarity comes at last
Bang! Another bullseye.
Is there really such thing as regulatory clarity? Regardless, we definitely have much more it now than we did a year ago.
If regulators started drawing a line in the sand in 2018, this was the year when they started erecting walls and guard towers on it.
I’m still worried that we’ll end up throwing the baby out with the bathwater
In the UK, the FCA has released formal guidance on cryptocurrency and are already ramping up investigations. Stateside, the SEC is going after offerings from Telegram and Kik.
The takeaway: obvious scammers are no longer regulators’ only targets – they’re taking aim at big names, too.
Naturally, there's a reason to be concerned. I’m still worried that we’ll end up throwing the baby out with the bathwater. Right now, companies such as Telegram and EOS have the opportunity to build a digital world that’s fairer, more efficient and more transparent. We risk losing that opportunity if we retreat to a paper-based, 20th century way of doing things.
There’s a balance to be struck here as people begin to think about what custody means in a world of digital assets. But I think the clarity’s almost there.
Prediction 5: new projects are born that go on to be household names in the next decade
It’s a bit tricky to judge a decade-long prediction after only a year. Still, we’re already seeing companies like Solidus Labs, Archax or even projects like compound.finance establishing themselves in the industry.
I don’t know whether these companies will become household names, but they’re certainly gaining traction and longevity. We’ll have to wait and see how they, and the industry at large, fare in 2020.
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