Pre-COVID, cryptocurrency was still a relatively unknown commodity in mainstream circles and to average consumers. Two years into the pandemic (or post-pandemic, can we say???) that has changed entirely.
Deloitte’s 2021 global blockchain survey highlights the extent of crypto’s emergence – and this survey was conducted only one year into the pandemic, in March/April 2021.
Note: “FSI Pioneers” are respondents whose organizations have already deployed blockchain activities into production and integrated digital assets into their core business activities
Remarkably, 76% of respondents believe that “digital assets will serve as a strong alternative to, or outright replacement for, fiat currencies in the next 5-10 years”. That’s quite a staggering number and one that surprised us, even as crypto enthusiasts.
Geographical Spread
Deloitte’s survey was fielded across ten different countries across the globe, with a total of 1,280 respondents.
The most apparent start jumping off the page is that most respondents are drawn from first-world countries. This is notable because Bitcoin, and crypto at large, is often said to have additional implications for developing nations with weak currencies.
Proponents argue for its potential to offer an escape route for citizens of failing currencies, as seen, for example, in Venezuela.
The biggest adopters per capita, after all, are Nigerians. We also saw Russian crypto volume spike recently as the rubble tumbled and Bitcoin hit an all-time high in the currency. So with the bulk of the respondents above, these macro factors are not a concern.
These survey respondents appear to be purely focused on the immediate ramifications for their businesses and industries – nearly all are centered in major financial hubs, too.
Ramifications of Crypto Growth
If digital currencies overtake fiat in the next ten years, it would be hard to believe the market cap of Bitcoin will remain at the current level of $772 billion (equating to $40,600 per bitcoin).
Indeed in that event, it would be closer to the store-of-value that is gold’s market cap sitting at $12.7 trillion (equating to over $600,000 per bitcoin).
A genuine alternative or replacement to fiat would entail broad ramifications; this would transform foreign policy and the FX market.
What would happen if another war akin to Russia/Ukraine – with crypto a viable alternative, could the world still leverage economic sanctions to restrain the war effort?
How many companies will go full-Tesla and hold Bitcoin on their balance sheets?
How many sovereign funds will have followed El Salvador’s lead?
Respondents had “at least a general understanding of blockchain, cryptocurrencies, and digital assets.”
Thus, given so many in the real world still don’t possess even vague knowledge about the intricacies of how blockchain technology works, we can perhaps expect this 76% to be a little bloated.
However, to begin with, it’s an enormous number, so even diluting that down conservatively, one can still draw a poignant conclusion.
The role of digital assets
There are now more than 12,000 cryptocurrencies, so the range of use cases is vast. Asset custody takes a predictable place as the top forecasted use case. However, the use cases in the second and third – new payment channels and diversifying investments/portfolios – present much more disruptive and intriguing scenarios.
Over 40% of respondents believe crypto will have a role in their organization in these areas – suggesting a world where pension funds routinely hold cryptocurrency or invoices and revenue are settled in crypto.
“Diversifying investments/portfolios” is undoubtedly most likely to be fulfilled by Bitcoin. However, the world’s biggest crypto may not necessarily be best placed to deliver on the use case of “new payment channels.”
While Bitcoin’s lightning network has been making tangible progress regarding scalability, there remains a host of cryptos dedicated explicitly to streamlining the payment process.
Bitcoin was the first cryptocurrency, and blockchain technology has evolved significantly since then.
While proof-of-work is necessary to maintain the most complex form of money and facilitate the creation of a reputable store-of-value asset, other blockchain mechanisms, such as proof-of-stake, could better suit a payment process.
However, this is all speculation for now – perhaps Bitcoin will dominate the payment space too.
The consequences here will likely be seismic for the industry at large.
Middlemen claiming fees on all sorts of expenses (credit card payments, asset custody, international transfers, remittances, and liquidity providers, to name a few) will see their industries upended. At the same time, speed and efficiency could improve as fragmented industries become streamlined – if, and it’s a big if – crypto delivers on its promise.
Barriers to entry
So, what is making people think twice about the inevitability of cryptocurrency mass adaptation?
Unsurprisingly, regulatory barriers place highly, with 63% of respondents citing it as the biggest obstacle to using digital assets globally.
The financial services industry is one of the most heavily regulated in the world, and the back-and-forth between users and regulators frequently makes headlines.
While many assume that regulation will catch up with crypto and a natural middle ground will be found as the industry matures, perhaps more surprising is that cybersecurity places above regulatory concerns in the first place.
Crypto has come a long way from seemingly daily high-profile hacks, such as the Mt Gox hack in 2014, and constant links to the dark web and illegal criminal acts.
However, this data reinforces that crypto still represents an enigmatic and murky asset class to the majority. Anonymous, irreversible, and highly complex blockchain assets still intimidate many unimitated with the technology.
Coupled with the frequent media headlines, such as this CNN article outlining that scammers took off with $14 billion in 2021, it’s no surprise fraud features so highly.
Over 75% of financial services industry (FSI) respondents strongly or somewhat agree that their organization will lose an opportunity for competitive advantage if they fail to adopt blockchain and digital assets.
This above stat we find especially interesting. It highlights how the speed of crypto adoption over the last two years has put businesses on notice.
Crypto has come from almost nothing to a topic that graces financial news sections daily, for better or worse.
As with any significant disruption, especially when technology is involved, there will inevitably be losers as companies and industries transform due to the advances.
This goes beyond companies, too – the most prominent Bitcoin bull of them all, El Salvador President Nayib Bukele, claims soon it will be irresponsible for countries not to own Bitcoin, such is its scarcity and inevitable price increase.
When we see 75% of respondents opined that their companies might lose an edge if they don’t give in to the technology, it draws up reminders of the social media revolution sweeping business last decade or the Internet at large before that.
Conclusion
There’s no doubt that this data paints a highly bullish picture of the continued growth of cryptocurrency.
While we need to remain cognisant that the demographic here perhaps is more crypto-centric than the average citizen, it’s still very promising for digital asset enthusiasts.
Yet another signal of the legitimacy cryptocurrency has achieved as an asset class in the mainstream eye.
The ramifications of some of the above predictions are enormous – make no mistake, the financial and monetary environments at large would be completely transformed.
However, whether these opinions come true or not, and to what extent, is a different story. We will have to wait and see – but it should be a fun ride either way.
