In 2021, the crypto industry witnessed exponential growth as Bitcoin touched all-time highs, from $29,000 at the beginning of the year to reach $68,000 in October, up 130%.
In the second half of 2020, large institutional investors started purchasing Bitcoin, with business intelligence firm MicroStrategy announcing the purchase of Bitcoins worth $250 million. Many large institutional players and major global banks , such as Morgan Stanley, Goldman Sachs, JP Morgan and BlackRock, entered the space, offering exposure to crypto assets to their clients. The first Bitcoin ETF was approved by US regulators and listed on the New York Stock Exchange in October.
The rise in interest from institutional investors was primarily due to clearer regulatory frameworks for crypto assets across jurisdictions, which increased institutional-grade custody and infrastructure providers within the space, and a burgeoning decentralized finance (DeFi) ecosystem, which provides opportunities for institutional investors to generate alpha. 2021 saw significant growth as the total value locked (TVL) in the DeFi market cap crossed $250 billion in the first week of November.
Innovation in the blockchain industry is growing rapidly. Non-fungible tokens, or NFTs, have been the major use case of crypto that emerged in 2021 with millions of users gaining exposure to NFTs through digital art, sports and gaming. Some of the key crypto trends we expect to see in 2022 are…
Central Bank Digital Currencies (CBDCs)
China was the first to pilot its digital currency, the digital renminbi (or e-CNY), work for which had begun in December 2017. Subsequently, several countries have been exploring and announcing the idea of a national blockchain-based digital currency to improve cross-border trade. There is a huge possibility that 2022 could be the year where we see more countries launching their own CBDCs. As countries experiment with digital currencies, for example Singapore’s Project Ubin, Canada’s Project Jasper and the Digital Euro in the European region, it provides an opportunity for India to be a part of the global digital ecosystem and introduce its own CBDC. CBDCs could be instrumental in supporting the public policy objectives of the government for direct transfer of benefits due to the transparency that blockchain provides.