Sunday, January 23, 2022

5 monetary themes to watch in 2022

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Good year! The last weeks holiday edition of Money Reimagined offered a look back at the past year and explored five ways our idea of ​​money has been challenged during these incredibly busy and news-laden 12 months. This week, we look to the year ahead and take a look at ways in which money could be further reimagined in 2022.

Who will be issuing our money in the digital future?

Will governments, armed with digital central bank currencies, continue to monopolize monetary systems? Will private corporate currencies reign, either with stablecoins that follow the value of pre-existing government units (eg, tether) or with their own floating tokens? Or will decentralized currencies like bitcoin end up becoming dominant? Or will they all be competing against each other in a multi-currency future?

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Of course, these questions will be far from being resolved next year. But the debate is likely to intensify, driven by various factors. China is rolling out its Electronic Payments in Digital Currency (DCEP) project during the Winter Olympics in February. The United States is developing regulations (see next topic) targeting private issuers of stablecoins. And the adoption of decentralized cryptocurrencies for payments continues to grow around the world, aided by advancing scaling systems such as Bitcoin’s Lightning Network.

Political discussion will intensify

As we mentioned in last week’s newsletter, 2021 has been a big year for crypto regulatory developments. Highlights include the debate in the US Senate on the crypto tax provisions in the infrastructure bill and the approval of an exchange-traded fund (ETF) based on bitcoin futures. It seems likely that regulatory pressure will become even more intense in 2022.

What is there to gain? Well, there’s a good chance that the United States Securities and Exchange Commission will find ways to clarify its position on whether tokens are unregistered securities, developers of tokens for decentralized finance (DeFi) are looking for ways to clarify their position on whether tokens are unregistered securities. possibly being in the crosshairs. There will likely be increased pressure from newly emboldened crypto supporters in Congress for a more complete overhaul of securities and other crypto-related legislation, although we are unlikely to see anything of it. as radical as the landmark 1996 Telecommunications Act, which some cite as a model for a clarifying legislative initiative around transformative new technology.

Meanwhile, the SEC will be under pressure to approve a bitcoin ETF based on spot prices, the next logical step after this year. approval of a very limited model, based on the future. We can also get clarification on how stablecoin issuers should be bound by US banking laws. And there will be further consolidation of international rules regarding the fight against money laundering by bodies such as the Financial Action Task Force. Hopefully the powers that be can open up to the constraints that their draconian solutions place on innovations that could stimulate financial inclusion.

Ethereum 2.0

Will Ethereum successfully transition to 2.0? With the gas fees for non-fungible token transfers (NFTs) and other transactions making the Ethereum ecosystem prohibitive for most, the pressure to complete the long-awaited Ethereum 2.0 project will increase. Already a parallel proof of stake blockchain known as the Beacon is working, but there are a lot of big moves to be made before the full 2.0 project can be considered a success. On the one hand, the merger of this Beacon chain with the main network will lead to a disruptive change in the symbolic economy for minors and validators. And there are still separate and equally difficult upgrades to come in Eth 2.0, including sharding, a way to reduce the amount of data Ethereum nodes have to process to maintain the blockchain. They are major companies and the future of the dominant smart contract platform depends on them.

Read more: 5 ways money was reinvented in 2021

Crypto’s environmental challenges / opportunities

Two things seem certain, whether people like it or not: Climate change is only going to get worse and the crypto ecosystem will continue to grow. So we need to end the current state of affairs where crypto critics are making ill-conceived calls for it to be banned and (equally naive) crypto supporters are ignoring the massive mining problem. fossil fuel based.

The conversation needs to shift to energy systems integrated into mining that not only motivate miners to use renewables, but also the industry to fundamentally fund the development of a more efficient and better managed “green” power grid. . I hope that in 2022 this kind of more sophisticated discussion emerges, as local managers of energy solutions join forces with innovators in the mining space.

Web 3

Where is Web 3? The year ended with a furious argument between bitcoin maximalists, led by Square CEO and former Twitter CEO Jack Dorsey, and Web 3 enthusiasts looking to give people more control over their data and content than we’ve seen in the course of from the two-decade-old Web 2 period. For my part, I believe that Web 3 is a reality and that those who work on it deserve the chance to build and test their projects, even if the whole concept is inevitably ill-defined.

This is because Web 2 is such a mess. Humanity needs a way out. Internet, as explained by Balaji Srinivasan and Parag Khanna in a recent convincing piece for foreign policy, is already disrupting and decentralizing power structures in the 21st century. We need to adapt our digital property management and user rights management systems to this new era. This discussion will inevitably intensify in 2022 and inevitably bring to light the many disparate and competing ideas surrounding Web 3.

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