The Global Risks Report 2023 explores some of the most severe risks we may face over the next decade. The document’s tone is realistic with some post-apocalyptic optimism: “As we stand on the edge of a low-growth and low-cooperation era, tougher trade-offs risk eroding climate action, human development, and future resilience.” As previously other think tanks reported, there is a common feeling that “As an economic era ends, the next will bring more risks of stagnation, divergence, and distress.”
We can even include this statement that the Bank for International Settlements study says 60+ trillion dollars of off-the-books currency swaps could be a profound, systematic risk.
Cathie Wood, ARK Founder, CEO, & CIO reported in the latest letter to shareholders that “Today, the money supply is declining, commodity prices are deteriorating, bloated inventories are unwinding, and innovation is disrupting the traditional world order, all pointing toward lower inflation, perhaps deflation.”
Despite apparent setbacks, many in the industry remain hopeful that this moment could dawn a new era. Michael Gronager, Cofounder and CEO of CHAINALYSIS, suggest that “After a tumultuous year, 2023 will be an opportunity to create a better and safer blockchain ecosystem. Crypto is a cross-border, instantaneous, and cheap way to exchange value, and I believe the demand for that is only going to increase.” Blockchain industry shows signs of stabilizing in the DeFi sector is flashing positive signals at the start of 2023.
There is no doubt about the potential of the technology and the impact it will generate in the future for the entire economy, but still missing the effort to fix the discrepancy that is coming from the actual narrative and the reality. 2023 Crypto Crime Trends: Illicit Cryptocurrency Volumes Reach All-Time Highs Amid Surge in Sanctions Designations and Hacking
David Gerad summarises the crypto scenario with great insight and right to the points.
How crypto worked in 2022:
1. Massive check kiting between all of the players — write a check you can’t cash, then write a bigger check you can’t cash to cover the first check.
2. Count the face value of each uncashed check as hundreds of millions of dollars in assets in your reserve.
3. Pray nobody ever tries to cash one.
How crypto works in 2023:
4. Someone tried to cash one.
Last week, Cameron Winklevoss of Gemini tweeted an open letter to Digital Currency Group’s Barry Silbert. This week, he tweeted another open letter— to DCG shareholders. Winklevoss directly accuses DCG of fraud, and calls on the board to fire Silbert as CEO. [Twitter; Gemini, PDF, archive]
In a recent report provided by the Bank of International Settlements ( BIS ) there are some clear indications on how to address the risks in crypto
• The recent high-profile failures of FTX and other crypto firms have re-ignited the debate on the appropriate policy response to address the risks in crypto, including through regulation.
• The “shadow financial” functions enabled by crypto markets share many of the vulnerabilities of traditional finance. These risks are exacerbated by specific features of crypto.
• Authorities may consider different – not mutually exclusive – lines of action to tackle the risks in crypto. These include containment or regulation of the crypto sector or an outright ban.
• Central banks and public authorities could also work to make TradFi more attractive. A key option is to encourage sound innovation with central bank digital currencies (CBDCs).
BIS economists suggest improving TradFi with CBDC to attract users away from crypto Central bank digital currencies (CBDCs) are digital currencies issued by a central bank that can improve the efficiency and inclusiveness of today’s payment systems. It is essential to note that other types of CBDCs are under development, such as hybrid CBDCs (which is a type of CBDC that combines retail and wholesale CBDCs) and central bank digital currency-fiat (which is a CBDC is pegged to a fiat currency, such as the United States dollar).
The opportunities for the future as Tokenization of assets and Carbon Credits require a Legal certainty. The principle requires that the law must be clear, precise and unambiguous, and its legal implications foreseeable.
In addition, Christian Catalini and Jane Wu suggested in a recent article on the Harvard Business Review that “ a regulatory framework that is purpose-built for the technology would only tackle part of the problem. It would definitively improve consumer protection and market integrity. It would not change the underlying incentives in the space and stop some of the reckless and fraudulent behavior it has attracted to date. “ So a new approach with effective metrics is advisable
Digital Wallets will be more critical than ever, but they are secure until there is no investment in a centralized exchange. DeFi could be the possible solution, but it requires that some underline assumptions are certain. The unbalance in stablecoins and the doubt on the actual reserve in centralise exchange may take the custodian on edge. A stablecoin collapse could spill into the U.S. bond market and economy, professor warns Even if the thee market is moving fast and on-chain data from Ethereum shows that ERC-20-based USDC has a much greater transfer volume than its main competitor USDT. It is essential to realize that need to be removed the toxic combination between the absence of a transparent and standardized evaluation model for digital assets and the mixology between token and crypto economy. A proper risk assessment with the removal of the obstacle will be an adequate baseline for future evolution.
Rebranding Crypto with Web3… and expanding AI control to reduce critical failure
Let’s consider 2022 the base camp for crypto looking for 2023
Bring your own crypto wallet (BYOW)
The Prisoner’s dilemma in crypto
Tokenization and Internet of Value: a powerful combination
Proof of reserve: Utopia or Dystopia?
Actual regulation in crypto: an overview on AML and upcoming MiCA
The Rise of Institutional DeFi
Embracing Innovation in Capital Markets: CBDCs
Bidirectional TradFi to DeFi opportunities