The crypto market on the cusp of adoption
SGSS published its first magazine related to blockchain, its opportunities and challenges 6 years ago. 3 years later, our second magazine focused on current use cases, including Initial Coin Offerings (ICO). SGSS Token Magazine in 2022 will naturally focus on the technology’s adoption.
In 6 years, the crypto market capitalisation has grown from 80 billion dollars to more than 2 trillion dollars1, a 25-fold increase. Our magazines therefore naturally follow the Gartner maturity curve; from the peak of unrealistic expectations via the abyss of disillusionment through to adoption (the plateau of productivity).
Adoption is now
2021 and 2022 have seen the massive arrival of institutional investors and corporate clients into the world of digital assets. In the United States (US), companies like Microstrategy and Tesla have converted part of their cash into Bitcoin. Hedge funds and even traditional funds are looking for exposure to this new asset class. A country like El Salvador recognises Bitcoin as legal tender. All of these factors have helped increase adoption and thus strengthen the ecosystem. However, we note differences between continents, with the US remaining dominant on the cryptocurrency scene and Europe positioning itself more on the appeal of security tokens. As a reminder, security tokens are financial assets created on a blockchain. Societe Generale is a driving force in this field, notably through its subsidiary SG Forge, which has already tokenised bonds and structured products.
This gap was already confirmed in the surveys that SGSS conducted in February 2021, as well as in market data. The Chainalysis2 index confirms to us the skyrocketing adoption of cryptos, and the number of Bitcoin holders has increased 10-fold in the last 6 years3.
Recent developments in central bank digital currencies, which have already become a reality in China with the Digital Yuan, will undoubtedly help transform our market towards a token market.
A regulatory landscape that is taking shape
If adoption has been possible, it is undoubtedly because the regulatory framework in all jurisdictions has provided clarity in all segments. France has been a pioneer on the subject, notably with the PACTE4 law, but also by setting an example through the Banque de France’s experiments, which allowed new technologies to be tested in future frameworks.
In Europe, it is also the turn of Germany, Luxembourg and more recently Italy to show the example. In summary, it is possible to invest in crypto in a professional world but with specific conditions. We will go deeper into this subject during the articles in this magazine.
We’ve been talking about countries, but what is Europe’s position?
Cryptocurrency and stablecoins are the subject of the MiCA (Markets in Crypto Assets) regulation, which aims to establish a European regulatory framework applicable to digital asset service providers. The regulation is expected to come into effect in 2023.
As far as security tokens are concerned, the Pilot Regime will be the one to facilitate the exchange and settlement of financial instruments issued in the form of crypto assets. The regime will allow testing in a “sandbox” environment by obtaining exemptions from the rules normally applicable to financial instruments.
ESG considerations should not be overlooked
In a world where global warming is at the top of countries and companies’ agendas, taking Environmental, Social and Governance (ESG) criteria into consideration is not a “nice to have” but a “must have”. Blockchain and cryptos cannot ignore this phenomenon given rising media criticism. It is important to remember that criticism of the energy consumption of cryptos is related to the “Proof of Work” protocol that underlies cryptos like Bitcoin or Ether. This protocol consumes a lot of electricity with a very high carbon footprint. The use of renewable energies allows these remarks to be tempered, but it could be used for other purposes. The alerts received on a potential ban within the framework of MiCA will undoubtedly accelerate the transition towards less energy-consuming protocols such as the Proof of Stake.
It is in the challenges that we develop opportunities. It’s a resourceful and creative market. Without dwelling too much on Decentralised Finance (DeFI), Non-Fungible Tokens (NFTs) or Metaverses, we realise that despite the maturity that we are observing, we always have new things being added.
Our experts will share their views on all these elements, whether from a regulatory, adoption or use case standpoint, as well as on the ESG aspect.
Enjoy the reading and welcome to the world of Tokens.
1 coinmarketcap.com, data as of April 2022
2 Chainalysis.com
3 https://fr.statista.com/statistiques/665756/nombre-detenteurs-portefeuillebitcoin-sur-blockchain-monde
4 Action Plan for Business Growth and Transformation
The I-DEAL dealing and execution solution, offered by SGSS, is a fully outsourced dealing desk, covering the entire...
Societe Generale Securities Services (SGSS) offers new services for asset management companies wishing to develop...