1、30/03/2022INDEPENDEN T P U B L I C AT I O N BY#0799R AC O N T EU R.NE TCRYPTOCURRENCIESFIVE POPULAR CRYPTO MISCONCEPTIONSCOULD CRYPTO BE USED TO DODGE SANCTIONS?0906WHAT THE DIGITAL YUAN CAN TEACH US12R A C O N T E U R.N E TC R Y P T O C U R R E N C I E S0302/cryptocurrencies-2022raconteur/raconteur

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5、6:03lobal regulatory authorities are not in the habit of issu-ing stern warnings that a class of assets is putting the entire financial system in jeopardy.Wary of the unintended consequences of their caution,they avoid sounding the alarm bell if at all possible.But,when it comes to crypto,such state

6、-ments are becoming more familiar.Many central banks and regulators have grown uncomfortable about developments in the crypto uni-verse and the rate at which crypto assets are growing.In February,theFinancial Stab il ity Board(FSB)joined the chorus of international bodies worried about the direction

7、 in which these markets might go.Itclaimed that they“could reach a point where they represent a threat to global financial stability”unless there is effective regulatory action.The Bank of England,the UKs Financial Conduct Authority(FCA),the Bank for International Settle-ments and the US Federal Res

8、erve are among others to have expressed similar concerns in recent months.But what exactly is the threat and why are policy-makers so worried?The fast-growing crypto assets eco system is home to a vast range of assets with varied and often complex underlying technologies and governance characteristi

9、cs.The FCA defines crypto assets as“a cryptographically secured digital representation of value or contrac-tual rights that is powered by forms of distributed-ledger technology and can be stored,transferred or traded electronically”.At its most basic,a cryptocurrency(such as bitcoin,which was minted

10、 in 2009)becomes an asset once it can be traded by investors.There are thousands of different crypto assets,including exchange tokens,utility tokens,security tokens and non-fungible tokens(NFTs).NFTs have gained popularity particularly quickly,hitting the headlines sev-eral times over the past 12 mo

11、nths.The rate at which this ecosystem isevolving is a source of fascination and promise for many people.But its a source of headaches for those responsible for international finan-cial oversight and regulation.What exactly constitutes a crypto asset?Which of these assets should be defined as securit

12、ies?Who can create or issue them?Do investors understand how they work,let alone the risks?Where should the regula-tory focus be?These are just some of the many questions occupying the minds of regulators.Viewed in purely financial terms,the total market for crypto assets is not especially large.Its

13、 capitalisa-tion increased to$2.6tn(1.9tn)in 2021,according to the FSB.But it explained in its February statement that crypto assets markets are a risk because of their blend of“scale,structural vulnerabilities and inc-reasing interconnectedness with the traditional financial system”.The nature of t

14、hese markets creates potential for regulatory gaps,frag-mentation or arbitrage,the board argued,adding that any stability risks could escalate quickly.Although there have been bouts of severe price volatility in crypto markets,these have not yet affected traditional financial markets,not least becau

15、se crypto assets arent used widely in real-world financial services(such as payments).And they operate largely outside finan-cial regulatory ambits.But,given the speed at which these assets are evolving,their knock-on effects could soon change.Crypto assets are in many ways digital versions of tradi

16、tional fin-ancial assets and are vulnerable to similar risks,but the anonymity of crypto transactions and the speed at which they are processed could produce more damaging outcomes.Those risks are exacerbated by fac-tors such as a lack of understanding of crypto assets among consumers,according to t

17、he FSB.Its statement came only weeks after the Bank of England flagged cryptocurrencies as a potential systemic risk to finan-cial stability in the UK.And the International Monetary Fund warned that many entities in the crypto universe were lacking“strong operational,governance and risk practices”.I

18、t referred to consumer protection risks arising from inadequate disclosure and oversight,plus the potential for the anonymity factor to“open unwan-ted doors for money-laundering”.Crypto assets are ascending the regulatory agenda as their rate of adoption and growing presence in retail and institutio

19、nal investment portfolios moves them ever closer to other asset types.The level of the threat to stability depends on the extent to which the traditional financial system is ex-posed to the crypto system,accord-ing to Andrew Henderson,a partner in the financial services regulation team at law firm M

20、acfarlanes.“For example,if investment and pension funds,insurance compa-nies and banks were to hold crypto positions for investment or capital management purposes and there is a crash in the value of those assets,they would suffer,”he says.“The other factor is volatility,driven Jeff SalwayMichael Du

21、nning via Getty Images2.2tnStatista,2022The market capitalisation of crypto assets in November 2021 arecord high for themarketAs crypto values grow,so do fears of acorrective market adjustment that couldcreate a wider economic shockMarianne CurpheyAn award-winning financial journalist,columnist and

22、blogger,who was formerly a stafferat The Guardian and The Times.Abigail EdgeA freelance journalist specialising in tech andsocial issues,with work published in Vice,The Guardian and MIT Technology Review.Ben EdwardsA freelance journalist andcommercial writer with more than a decade of experience cov

23、ering finance,business,law andtechnology.Jeff SalwayA freelance journalist and former personal finance editor at The Scotsman.He has contributed to the New Statesman,Money Observer and the FT.Chris Stokel-WalkerA journalist and author specialising in technology and culture,with bylines in The New Yo

24、rk Times,The Guardian and Wired.Ouida TaaffeThe editor of Financial World,the magazine of the London Institute of Banking&Finance.She has previously covered the telecoms industry.Finbarr ToeslandA London-based freelance journalist who has contributed to outlets including NBC News,the BBC,The Telegra

25、ph and The Times.ContributorsCRYPTOCURRENCIESWatchdogs struggle to corral elusive crypto asset marketsThe authorities have yet to come up with a coordinated approach to tackling what one international monitoring body already deems a threat to global financial stabilityP O L I C YLead publisherUsman

26、ShahDesign/production assistant Louis NassDesignKellie JerrardCelina LuceyColm McDermottSean Wyatt-LivesleyDesign directorTim WhitlockIllustrationSara GelfgrenSamuele MottaDeputy editorFrancesca CassidyManaging editorSarah VizardSub-editorsNeil ColeGerrard CowanNiamh LewisKate WilliamsonReports edit

27、orIan DeeringHead of productionJustyna OConnellGPublished in association withR A C O N T E U R.N E TC R Y P T O C U R R E N C I E S0504by the high number of speculators,which is one of the characteristics of an immature market.”That factor has been amplified by the extent to which the media and poli

28、ticians have focused on crypto-currencies most notably,bitcoin that arent asset-backed.Demand has been fuelled to a significant degree by gamification and social media influencers,who have also shown how volatile valuations can be,says Rachel Waggott,head of reg-ulatory affairs at Innovate Finance.“

29、It is these cryptocurrencies that regulators have focused on in terms of stability,”she says.“As their values grow,so do fears of a correc-tive market adjustment that could create a wider economic shock.”The perceived threat should,in theory,diminish as the market mat ures and becomes better under-s

30、tood by investors and authorities.Its not unusual for innovation in new asset classes and financial instruments to cause consternation among regulators.The evolution of digital assets is still at a relatively early stage.“What normally follows,as gen-eral understanding of such instru-ments improves,

31、is that regulators become increasingly at ease and focus on consumer protection and minimising abuse of the system,”says Heidi Pease,head of invest-ment products at Wave Financial,a digital asset investment manager.Several other issues link crypto assets directly or indirectly to fin-ancial stabilit

32、y.Most recently,the Russian invasion of Ukraine has further highlighted the problems in fully understanding what the rise of crypto means for global finance and security.There have been signs that cryptocurrencies including bitcoin are being used in Russia as an alter-native to traditional fin ance,

33、poten-tially undermining the impact of economic sanctions.Similarly,the FSB and other bod-ies have noted that the pseudony-mous nature of cryptocurrencies(crypto wallets can be held in fake names)makes them a popular way of laundering the proceeds of crime.Crypto criminals held$11bn-worth of crypto

34、assets by the end of 2021,up from$3bn the previous year,according to Chainalysis.Meanwhile,the issue of consumer protection becomes ever more imp-ortant as the growth in popularity of crypto assets increases the mar-kets exposure to the real economy.The FCA estimated in 2021 that nearly 80%of UK adu

35、lts had heard of cryptocurrencies and about 2.3 million Britons owned some form of crypto asset.At the same time,it found that the level of understand-ing of the market among consumers was declining,which suggested that many people were investing in assets they knew little about.The task of ensuring

36、 the effective oversight of crypto assets markets is complicated by a lack of clarity as to what exactly needs regulating and who should be responsible for doing it.Its no surprise,given the vast array of assets under the crypto umbrella,that the task of regulating them falls to a similarly dizzying

37、 range of organisations.Crypto is not alone in this res pect.Fintech companies,for instance,must deal with a variety of UK regulators and quasi-regulators,including the FCA,the Prudential Regulation Authority(PRA),the Payment Systems Regulator and various government departments.“There is a tendency

38、to lack a coherent national strategy across these bodies,”Pease says.“A joined-up approach is needed.It requires clear direction from HM Treasury and a cohesive approach from the Bank of England,the PRA,the FCA and HM Revenue&Customs.”The effectiveness of national ap-proaches is further undermined b

39、y the fluid cross-border,cross-sector nature of crypto assets,with the contrasting approaches of different regulatory authorities adding to this fragmentation.Rufus Round,CEO of digital asset broker GlobalBlock,notes that some jurisdictions,including Gibraltar and Switzerland,were quick to set up de

40、dicated regulatory bodies.“They have had protections and regulations in place for some time now,allowing many crypto asset companies to comply with stringent money-laundering rules,”he says.Similarly,the new Dubai Virtual Assets Regulatory Authority will have oversight of the sale of virtual assets

41、and tokens,as well as respon-sibility for regulation and authoris-ing virtual asset service providers.Elsewhere,though,the picture is different,as global authorities are operating at varying speeds.In the EU,the proposed markets in crypto assets bill(Mica)which aims to tighten regulation to achieve

42、a more uniform approach on the Continent is proceeding slowly but surely,with potential to form the basis of a global approach.Mica focuses mainly on different types of stablecoins(digital curren-cies linked to assets such as the dollar,the euro and gold)and cryp-tocurrency exchanges.A proposal to b

43、an energy-intensive proof-of-work digital currencies such as bitcoin because of their ecological impact was removed from the bill in March,albeit with potential for it to be restored.“Both the US and the EU financial regulators have already signalled that legislation to regulate crypto in the coming

44、 years will focus mostly on exchanges and stablecoins,”observes Mikkel Mrch,executive in payments and in capital mar-kets,”according to Waggott.A more balanced approach,she says,would feature better consum-er protection in speculative crypto markets,a framework for stable-coins that provides consume

45、r and market trust,and a central bank digital currency that complements a vibrant stablecoin market.An obvious starting point from a stability perspective is protection against money-laundering.“This means tracing the source of capital and ensuring that sanctioned capital doesnt get introduced back

46、into the financial system via crypto,”Pease says.Similarly,there are calls for minimum technology standards to ensure operational resilience,reducing the risk of system failures.But any threat posed by crypto assets to international financial stability will best be mitigated by greater cross-border

47、coordination.“Since the 2007-08 crisis,inter-national coordination for financial stability has been central to bank-ing regulation,”Henderson says.“Crypto regulation is a natural exten sion of this and the signs are positive albeit that,as has been the case historically with financial crises,a crypt

48、o crisis may be diffi-cult to detect.”Regulators are not alone in strug-gling to keep abreast of innovations in this fast-moving market.While some are seeking to embrace digital innovation in general,others are taking a much stricter,reactionary line.But,as the entwinement of crypto and traditional

49、financial systems continues,and the pot-ential ramifications for financial stability worsen,the fragmentation of global and nat ional oversight will become ever more exposed.eclipse_images via Getty ImagesLast year Beijing banned all virtual currency trading and speculation,tagging crypto-related bu

50、siness as“illegal financial activities”.The lack of coordination across borders creates potential for regula-tory arbitrage,as crypto businesses are able to exploit differences bet-ween regimes,according to Round.“Poorly led regulatory regimes are seeing incumbents move operations to more proactive

51、jurisdictions,maintaining their bases wherever they go,should frameworks change or catch up,”he says.The contrast in global approaches illustrates the difficulty of striking abalance between promoting inno-vation and managing the risks posed by crypto as an asset class.“The regulatory focus has tend

52、ed to be on managing risks associated with speculative cryptocurrencies,rather than on enabling innovation The regulatory focushas tended to beon managing risksassociated withspeculative cryptocurrencies,rather than on enabling innovation in payments and incapital marketsdirector at ARK36,a crypto-d

53、igital asset hedge fund.“For example,by providing strict guidelines defining the entities that can issue stable-coins,as well as rules on how these cryptocurrencies should be pegged to the underlying assets,regulators will be able to greatly limit the risks mentioned by the FSB.”While the UKs strate

54、gy largely aligns with that of the EU,the US has several agencies taking differ-ent approaches to the challenge.The Securities and Exchange Com-mission,for instance,is concerned that the crypto assets it considers to be securities should be subject to rob ust regulation.By contrast,the Department of

55、 the Treasury is more interested in ensuring financial sta-bility and combating crimes such as money-laundering.Again,progress here is slow but steady.President Biden recently signed an executive order on digital assets that requires the relevant agencies to examine the regulatory landscape for cryp

56、to.Pease believes that“many major regulators are waiting to see what the worlds biggest capital market does to better contextualise their approach.As the US more clearly defines its approach towards pure crypto exchange-traded funds,for example,we will see other major markets follow.”Japan,seen as r

57、elatively friendly towards crypto,recognises bitcoin and other digital currencies as legal tender.But it has responded to concerns about the potentially nef-arious use of stablecoins with pro-posals to introduce a registration system for intermediaries providing crypto asset trading services.China,b

58、y contrast,takes a much stricter approach.Cryptocurrencies arent considered legal tender here.80%27bnCoinMarketCap,2022LinkedIn,2022of retail,grocery and luxury goods merchants are willing to accept cryptocurrenciesThe 24-hour trading volume of the worlds three largest crypto exchanges on 21 March 2

59、022Commercial featureSolving the ever-growing need for computing powerHow decentralised blockchain network solutions are powering the metaverse and the future of technologyechnology is moving faster than ever in todays increas-ingly digitally interconnected world.One of the biggest enablers of this

60、is artificial intelligence and machine learning.This cutting-edge technology is driv-ing the development of a host of new applications that run on blockchain and use smart contracts such as decentral-ised finance(DeFi).Blockchain alone has already been widely adopted in a range of industries,from ba

61、nking and financial services to healthcare,with a growing number of uses.Then there is the metaverse:a virtual reality where users can interact,play online games and experience new and different activities.Its fuelled by cryp-tocurrency and non-fungible tokens(NFTs),which are used to buy digital ass

62、ets ranging from gaming cards to art and real estate.However,for users to experience this new technology seamlessly,a huge amount of computational power is needed.Yet,there is also a surplus of hardware that is unused 60%of the time.But there is a solution.Blockchain expert Cudos is set to launch th

63、e main-net(an independent blockchain running its own network with its own technol-ogy and protocol)of a new interoper-able Layer 1 blockchain network in the coming months,which brings together all of these worlds of DeFi,NFTs and online gaming.It will be easy to use,affordable,fully transparent and

64、secure.When completed,the new solution will run using its own native Cudos token and will power WEB3 projects with decentralised cloud-based solu-tions.Ultimately,it will provide a fully scalable,sustainable and intercon-nected network for developers,valida-tors and entrepreneurs.By matching up the

65、ever-growing demand for and supply of high-perfor-mance computing power,the network will enable individuals and entities with surplus capacity to get paid for provid-ing computing power,which then gets put into a large global,central pool.This will allow users who,for example,may be running a render

66、ing job or a machine learning algorithm,to access the power they need to perform their work much cheaper than hyper-scale centralised providers.“We have seen that the nature of the functionality in other blockchains has been limited by the computational power available,”says Matt Hawkins,founder and

67、 CEO of Cudos.“For exam-ple,many DeFi and NFT products,such as generative NFTs,have had to be stored off-chain,but because of our more advanced capabilities,were able to do everything more effectively on-chain.”Another problem is the high gas fees users have to pay for the com-puting power required

68、to process and validate transactions on the Ethereum blockchain.This is due to the huge energy consumption used in mining under Ethereums existing proof-of-work mechanism.However,the more efficient dele-gated proof-of-stake model Cudos employs will offer lower gas fees compared to other Layer 1 netw

69、orks.Thats because the new model will allow it to process thousands of transactions per second.Another challenge is that while many blockchain solutions have been established to support smart contracts,they are still in their relative infancy in terms of capability.That means users are limited in th

70、e number of applica-tions they can adopt them for.But with the Cudos solution,the plat-form will leverage its computing net-work to enable more complex smart contracts to be built and run than can currently be done on popular plat-forms such as Ethereum.It will also use the Rust programming language

71、,which is easier to use for those who arent so familiar with blockchain.Cudos has been developing its new network over the last 12 months.During that time,it has been using sev-eral testnets(an alternative blockchain used for testing)by incentivising vari-ous stakeholders,including its com-munity of

72、 developers,validators and delegators.Tasks include deploying smart contracts,using Cosmos Gravity Bridge,minting and transferring NFTs.The process has involved various moving components,including all of the validators coming online at the same time and migrating their tokens from ERC-20 Ethereum to

73、kens to the native chain.As the backbone of the blockchain,Cudos provides security for validator deposits,and enables slashing and governance voting.Once all dependency tasks,including secu-rity patching and its phase four testnet,have been completed,it will be ready to go live.The company plans to

74、launch the mainnet later in the year.It will add additional functionality as the product develops over time.“Initially,we want to provide developers,validators and token holders with a fully decentralised network solution,”says Hawkins.“But well be looking to add more meat to the bones as it develop

75、s in the future in terms of how they will be able to inter-face with it.”Cudoss blockchain is built on Cosmos,an ecosystem of inter-connected apps and services.Its inter-blockchain communication protocol enables the transfer of tokens,assets,NFTs and data to and from other blockchains.Focused on red

76、ucing entry barri-ers for developers to build decentral-ised apps,its blockchain is designed to enable them to add to its limitless network.Its decentralised cloud infra-structure is distributed among millions of people globally to facilitate this.This decentralised cloud computing solution called C

77、udo Compute allows for peer-to-peer sharing of comput-ing resources across the world.This prevents the need for hyper-scale data centres and utilises idle computing power,which may otherwise become environmentally damaging e-waste.If technology continues to evolve at its current breakneck speed,bloc

78、k-chain networks such as Cudos will have a crucial role.Meeting the ever-grow-ing need for computing power is only the start in a metaverse of new and exciting opportunities.For more information about Cudos new blockchain network solution visit cudos.orgWe have seen that the nature of the functional

79、ity in other blockchains has been limited by the computational power available.For example,many DeFi and NFT products,such as generative NFTs,have had to be stored off-chainTR A C O N T E U R.N E TC R Y P T O C U R R E N C I E S0706Ben Reeve,partner at Oliver Wymans global financial services practic

80、e and digital assets plat-form,says that analytics providers such as Chainalysis and Elliptic can map addresses on blockchains to identify transactions that might be associated with criminal activity.This information is used by govern-ments and banks.Also,the flipside of anonymity can be a risk for

81、the retail investor.“A crypto asset is entirely secured by a private key,so it is essential to protect this,”Reeve says.“In tradi-tional transactions,you can call your bank if you forget your online log-in details.With cryptocurrency accounts,no one else has access to your private key and there is n

82、o recourse if you lose it.”There are about 18,000 cryptocur-rencies and 300 million crypto users around the world.The term cryptocurrency is used to describe a wide variety of coins,systems andnetworks,many of which have You can read a lot about cryptocurrencies on blogs andsocial networks,but make

83、sure that you dont getsuckedin by all the hype thats being peddled.Expertsreveal some of the most widely circulated misconceptionsin this field from the belief that blockchains are invulnerable to the notion that a crypto investment is likely to deliver big profitsDont believe the crypto brosMariann

84、e CurpheyK N O W L E D G Edifferent characteristics,ownership structures and levels of volatility.“One of the key misconceptions in the mainstream media and,as a result,in popular understanding is that bitcoin and crypto are one and the same.This is far from the case in reality,”observes Julian Lini

85、ger,co-founder and CEO of Relai,a bitcoin investing app.“The fact is that bitcoin has been around for several years,whereas the wider crypto world is very much in its infancy.To put it into perspective,other cryptocurrencies are startups in comparison and should be treated as such by investors.”He s

86、uggests that before investing in a cryptocurrency you should look closely at the industry landscape;make sure that you understand it;and research the background of the founders,their past projects and the experience they have accu-mulated in the sector.In effect,you should approach a crypto invest-m

87、ent as if you were thinking about putting your hard-earned money into a fledgling company.“Ask yourself the question:is this project going to solve a problem that actually needs solving,or is it just hype?”Liniger advises.All cryptocurrencies are the same thing in essence1Bitcoin has been around for

88、 several years.Other cryptocurrencies are startups in comparison and should betreated as such Crypto trading,like all other trading,is a zero-sum game.You make money at the expense of othersCrypto is not a one-way street to riches.The myth has been perpetu-ated by enthusiastic male crypto investors(

89、known as crypto bros),threads on Reddit and posts by social media influencers.“The second misconception that really needs addressing is this get-rich-quick myth,”Liniger says.“Owing to the dominance of the crypto bro narrative,bitcoin has this lingering reputation as an all-or-nothing asset class th

90、at bullish investors pursue in order to double their money essentially a gam-bling exercise.”Jeremy Eng-Tuck Cheah,associate professor in decentralised finance at Nottingham Business School,says that its a commonly held miscon-ception that everyone involved in crypto will make money.“Crypto trading,

91、like all other trad-ing,is a zero-sum game.You make money at the expense of other peo-ple,”he stresses.There is also a misconception that crypto mining is a quick way to get wealthy,Cheah adds.“The set-up(entry)cost can be very high.Mining for cryptos is expensive business,so not everyone with a lap

92、top can just start doing it.The algorithm under-lying this process requires greater computing power as more cryptos are mined.”The misconception that blockchain is bulletproof comes from inves-tors understanding that a large ledger of data held in a block cannot be altered or tampered with retro-spe

93、ctively.A blockchain system creates a database that is secure and held by a multitude of users,rather than a single third party.Yet this does not mean that the tech-nology is immune to sophisticated and concerted attacks.“It is a commonly held view that blockchain technology is safe,”Cheah says.“Alt

94、hough is true that While some cryptocurrencies are designed with privacy at their core,these are not usually the type used by retail investors,Wadhwani says.“It is a misconception that crypto is predominantly used for illicit,nefarious and dark purposes,”he notes.“There once was a time when the earl

95、y adopters were using it on Given the volatility of bitcoin and other cryptocurrencies,demand has grown for products that have some of the positive aspects of crypto without the swings in value that put a lot of investors off.Stablecoins were developed to combine the convenience and speed of digital

96、 payment systems with the stability of traditional financial transactions.They offer a digital currency alternative to crypto and are designed to have limited price fluctuations.Some stablecoins are High returns are likelyBlockchain is safe and secureCrypto is anonymousAll stablecoins are backed by

97、dollarstransactions held and written into the blockchain cannot be changed or erased,attacks on blockchains can happen and succeed.For exam-ple,for the blockchain to remain secure,validation by users is cru-cial.But,if the majority of users arebeing held by the attacker,the attacker can maliciously

98、influence the verification process.”Such an attack might take place if hackers succeed in creating numer-ous fake identities,or by massing resources and taking control of more than half of the network.the dark web,but it is like saying that the mobile phone system is corrupt because its being used b

99、y 1%of people for criminal purposes.A lot of people think that crypto is anonymous,which would make it a great place to stash ill-gotten wealth,but everything in a block-chain is open and transparent.”linked to traditional(government-issued,or fiat)currencies such as the dollar,the euro and the yen,

100、and are priced on a one-to-one basis.Others are backed by gold or other com-modities that exist in the physical world,such as property.This has led to the perception that all stablecoins are tethered to a real-world asset.But this is not the case,according to Cheah.“Not all stablecoins are backed by

101、 fiat currency or precious commodi-ties.Instead,they use some kind of algorithm mechanism,”he says.The stablecoins in these examples maintain their price stability via algorithms that reduce or increase supply in the market to match demand.If the price is rising,for instance,more stablecoins will au

102、tomatically be released on to the market to dampen volatility.2453The other source of vulnerability is the risk of human error.There is still an element of the Wild West in the crypto landscape,according to Sanjay Wadhwani,founder and CEO of MetaFrames,a blockchain media company.“Investors are makin

103、g big mis-takes in the way they are interact-ing with blockchains,”he observes.“They fall victim to phishing,they give away the keys to their wallet and they dont always understand the platforms.”Wadhwani continues:“There are plenty of bad actors out there who are peddling get-rich-quick schemes.The

104、yre preying on peo-ples fear of missing out.It is impor-tant always to know who is behind the crypto or exchange you are using.A lot of launches are faceless and nameless.”Go From Zero to CryptoFind out how to unlock crypto foryour business in3 R A C O N T E U R.N E TC R Y P T O C U R R E N C I E S0

105、908Using cryptocurrency transactions as a way to circumvent financial sanctions while technically possible is fraught with difficulty,particularly when it comes to converting funds into fiat currencycould also enable sanctioned indi-viduals to conceal the destinations of their funds.Nonetheless,evad

106、ing sanctions at scale using crypto remains difficult and its unlikely to get any easier.Even as the size of the crypto mar-ket grows and mainstream adop-tion reduces the need for on-and off-ramps to convert funds in and out of fiat.“Even if you could transact en-tirely in crypto,pure bitcoin barter

107、 transactions probably arent going to get sanctioned billionaires very far,”Sauter says.“And,even if we do get to the point where there is widespread day-to-day spending adoption,then you might see the evolution of KYC requirements for merchants that do sizable business using crypto.”The fact that t

108、heres a permanent record of each blockchain trans-action means that investigators can potentially piece together fund movements and wallet ownership as more intel becomes available.“Blockchain gives you the map of the crypto world.On top of that,we overlay the street signs and the name of each stree

109、t tells you where to go and whos who,”Malcolm says.“That information is gathered over time.Even if you dont have a complete picture today,we contin-ually add to that data,so that you can gradually build a clearer view of where funds have flowed.”Fears that crypto is being used to sidestep sanctions

110、are,therefore,largely misplaced.in value and being reliant on banks that can no longer send money on your behalf to the rest of the world,”says Benjamin Sauter,a crypto law-yer at Kobre&Kim,a specialist in global disputes and investigations.Although crypto can clearly be a force for good,concerns re

111、main that it can also be used to facilitate wrongdoing.As western govern-ments continue to place sanctions on Russian businesses and indi-viduals,one question has loomed large:could sanctions be evaded by shifting assets into crypto?Not nearly as easily as you might imagine,the experts say.“In some

112、respects,crypto is no diff erent from traditional fin ance,”Sauter says.“Law-abiding crypto-currency exchanges and other ser-vices that are potential on-ramps and off-ramps for crypto are aware of whom those sanctions apply to.Just like any traditional compliant s Russian armoured col-umns rolled in

113、to Ukraine on 24 February and its cities came under attack,the world watched in horror and financial aid for refugees and those trapped in the country began flooding in.By early March,almost$100m(76m)had been donated in crypto-currency alone,underlining the unique opportunity that crypto presents fo

114、r sending funds directly to people in war zones to support the relief effort.Meanwhile,for those trapped in Russia,cryptocurrency also pro-vides a haven against the falling ruble and state-imposed capital controls.It equally highlights the opportunity that crypto presents for helping individuals to

115、maintain their economic freedoms.“This is a good use case for why you may not want to be dependent on a fiat currency thats collapsing LEON NEAL/Contributor via Getty ImagesBen Edwards liquidity to wash quite substantial amounts of money?A lot of people would argue that there isnt,”says Deborah Hutt

116、on,a partner at law firm Eversheds Sutherland.The volatility of the market may also make crypto less suited for storing substantial assets,while its pseudonymous nature still doesnt make it easy for an entity to con-ceal its ownership.Any time some-one wants to convert fiat currency into crypto,they

117、 will need to use an exchange that is likely to com-ply with both know-your-customer(KYC)and anti-money-laundering(AML)regulations.“There may initially have been a misconception that things were a lot more anonymous with crypto than they really are,”Hutton says.“Were looking at a global regula-tory

118、approach.Were looking at the rise of blockchain analysis tools.And were looking at more sophisti-cated investigation procedures.”One company that is developing blockchain and crypto monitoring tools is Chainalysis,which can place alerts on crypto wallets that have been linked to sanctioned individua

119、ls or organisations.“If you are a crypto exchange that is interacting directly or indirectly with a sanctioned wallet,you will get an alert that you are receiving funds,or that someone is trying to make a transfer,from a sanctioned entity,”explains Caroline Malcolm,head of international public polic

120、y and research at Chainalysis.The ability to detect indirect fund flows is a vital tool for unmasking sanctioned accounts that are try-ing to cover their tracks by moving funds in and out of several wallets.“Someone whos trying to evade sanctions is not going to open an account under their own name

121、and then transfer to another exchange directly.Theyre obviously going toobfuscate,”Malcolm says.“But,even they are not transferring dir-ectly,we can still see that,maybe three hops away,those funds came from a sanctioned wallet.”One potential way of circumven-ting the AML and KYC rules is to use an

122、exchange in a jurisdiction that has a more relaxed approach to sanctions compliance.“You could use offshore entities that dont follow sanctions policies,so that is one potential weak spot,”says Teunis Brosens,head econo-mist for digital finance and regu-lation at the ING banking group.“But,as soon a

123、s you move towards dollars,euros or pounds,you will most likely have to deal with a crypto company that is subject to sanction policies itself.”The growth in decentralised fin-ance apps may also offer a way for sanctioned entities to move their crypto assets without needing to use a traditional exch

124、ange.Sauter says:“Thats not going to result in cash,but you can convert assets into different forms.You can do this a lot,making transactions more difficult to track and obscur-ing the path that assets take and who controls them.”He explains that mixing services,which break down funds into smaller t

125、ransactions or exchange them into other cryptocurrencies,It will all come out in the wash:why crypto is no shield for the sanctionedbank,they would not permit those sanctioned entities to move funds.”Another factor making it difficult to dodge sanctions using crypto is the size of the market,which t

126、otals about$3tn.By way of comparison,the value of the global real-estate market was almost$330tn in 2020,according to Savills.“The market for crypto has grown rapidly,but is there actually the As soon as you move towards dollars,euros or pounds,you willmost likely have to deal with a crypto company

127、that is subject to sanction policies itselfCRYPTOS DARK SIDEShare of total crypto transaction volume taken by illicit transactions Chainalysis,2022M O N E Y-L A U N D E R I N GA1.42%0.76%3.37%0.62%0.15%20172018201920202021Commercial featureInsurance broker leads digital assets across the final front

128、ierInsurance is the last barrier preventing the widespread adoption of crypto and digital assets,says Lloyds broker Superscript,which is acting as a pathfinder for insurers and the digital assets industryryptocurrencies are gaining acceptance among main-stream asset managers.Ray Dalio,founder of the

129、 worlds largest hedge fund,Bridgewater Associates,said last year that he owns bitcoin,having previously expressed doubts about the future of crypto.Even more significantly,US President Joe Biden issued an executive order on 11 March preparing the ground for federal regulation of crypto.Biden also as

130、ked the Federal Reserve to explore whether the central bank should create its own digital currency.The move should help legitimise the digital asset industry and further encourage professional investors to explore the potential of diversifying into crypto.Insurance for the digital asset industry is

131、now the final fron-tier stopping crypto from fully enter-ing the mainstream of finance,says Ben Davis,team leader,digital assets at Superscript,the first UK insurtech company to become a Lloyds broker.Davis says:“Digital asset compa-nies lack insurance options simply because insurers feel like they

132、dont really understand the sector or the risks it faces.Yet,insurance is critical if crypto is to enter the mainstream of the investment world.Without it,the biggest players are left unregulated,and their customers unprotected.”Superscript has built a dedicated digital assets team,led by Davis,to br

133、idge the gap between insurers and the digital assets space.He adds:“I have been involved in digital assets for many years and insurance for even longer,and so have all my colleagues we are from the crypto community and are advocates for that commu-nity.We understand the language they speak,share the

134、ir concerns and ambitions,including a dedication to accelerating the mainstream adoption of digital assets.We believe the key is allowing crypto entrepreneurs to take risks,safe in the knowledge that we will catch them if they fall.”The deep connections between Superscript and the digital asset ecos

135、phere are vital,given the lat-ters dynamic and diverse nature.The sectors stakeholders range from custodians(which look after the dig-ital assets),crypto exchanges,stu-dios involved in non-fungible tokens(NFTs),decentralised finance plat-forms and protocols,to the venture capitalists and hedge funds

136、 that are investing in crypto.Davis team is engineering a compre-hensive suite of insurance products for web3.0 businesses,specifically designed to meet their commercial insurance needs.These products are already avail-able,with more to follow later this year.Superscript has built up a multi-stream

137、of premiums from scratch.“Were working with some of the big-gest names globally in the digital asset industry,which is really exciting,and the business is gaining momentum,”says Davis.While 200 digital asset businesses applied to Superscript for insurance in 2021,that figure has risen past 100 alrea

138、dy this year.A key challenge is a lack of the infor-mation required to assess and price risk.Superscript is exploiting lead-ing-edge technology,such as machine learning and big data,to provide insur-ers with all the data they need to prop-erly assess risk.Dan Ross,technical lead digital assets at Su

139、perscript says:“We have developed a proprie-tary model that allows us to cross-ref-erence the risks facing a business against 2,000 data points.”That allows insurers to feel comfortable taking on the business brokered by Superscript.Ross helped Superscript become the first Lloyds broker to be accept

140、ed into Lloyds Labs cohort 7 to develop the machine learning algorithm that is used to aid their technical risk analysis.Spreading knowledge about the digi-tal asset industry within the insurance sector is vital,argues Davis,because insurers hold a number of misconcep-tions.Chief among these is that

141、 the risks facing this newly emergent tech-nology are fundamentally different from those that challenge traditional businesses.In reality,many of the risks including cyber attacks and the associated problems of data breach,ransomware and business interrup-tion are the same.Just like other companies,

142、crypto firms also require professional indemnity insurance to cover breaches of contract,or errors and omissions.There are,however,some risks that are specific to crypto,such as the theft of private keys(pass-words that allow owners to access their assets)and intellectual property infringement relat

143、ed to NFTs.Davis says:“Most underwriters think crypto is incredibly complex and they will never be able to understand dig-ital assets,when in reality the major-ity of the risks are really no differ-ent from those they already insure in many other sectors.Moreover,we can act as pathfinders,leading th

144、em through those areas that do require specialist expertise.”Other myths include the impact of crypto on the environment.Despite the headlines,Davis says,mining of bitcoin only accounts for 0.14%,of global energy consumption,where industries like manufacturing make up 77%.He adds:“Christmas lights a

145、round the world consume roughly the same amount of energy as the bitcoin network.”Illicit activity is another concern.Yet Davis points out that it has been proven many times that bitcoin is not the instrument for illicit activity that people make it out to be,with illegal uses accounting for less th

146、an 1%of all activity on the bitcoin blockchain.Finally,the argument that crypto is just a bubble that will soon burst and is therefore not worth pursuing seems less credible every day.The fact that the Federal Reserve(which issues US Treasury bonds,the bench-mark against which all investment risks a

147、re calculated)has now been instructed to explore the creation of a digital currency surely shows that crypto is here to stay.Over the past five years,Davis says,the Superscript team has countered every argument that insurers have put forward to stay out of the sector.Superscripts combination of prop

148、ri-etary machine-learning technology,data science,underwriting expertise and partnerships with leading under-writers and digital asset companies will ensure the company plays a promi-nent role as digital assets move into the limelight in the coming years.Those insurers that have entered are finding

149、business very profitable.While prices of crypto will almost certainly remain volatile,there is clearly high and growing demand for businesses utilising and gaining exposure to digital assets and then ultimately for insur-ance solutions.That,Davis adds,means that the wider financial industry has an o

150、bligation to understand the sector and provide solutions that will allow the industry to flourish and develop in a secure environment.Get in touch,see how Superscript can help find you the right insurance for your digital asset business, is critical if crypto is to enter the mainstream of the invest

151、ment world.Without it,the biggest players are left unregulated,and their customers unprotectedCBen Davis,team leader(left)and Dan Ross,technical lead(right)-digital assets at SuperscriptR A C O N T E U R.N E TC R Y P T O C U R R E N C I E S1110 MINING FOR VIRTUAL GOLDTech-savvy investors obsess abou

152、t fluctuations in cryptocurrency markets;consumersschool themselves on all the newly minted coinage;and fintech firms fear the arrival of heavy-handed regulation that could stifle innovation.But where does all the cryptocurrency come from in the first place?Crypto mining receives relatively little a

153、ttention,but the sector would be nothing without this energy-hungry processCRYPTO MINING IS BECOMING MORE COSTLYPrice of customised computer hardware used to mine cryptocurrencies($per terahash)at various power efficiency settings(joules per terahash)HYDROELECTRICITY POWERS MOST CRYPTO MINING AROUND

154、 THE WORLDDistribution of crypto hasher energy sources in 2020,by regionTHE HIGHER THE DIFFICULTY,THE MORE COMPUTING POWER IT TAKES TO MINEAmount of processing power applied to mining new bitcoins(terahash)THE ENERGY USED BY BITCOIN COULD LITERALLY POWER A NATIONEnergy consumption of bitcoin compare

155、d with energy consumption in selected countries in March 2021Jan 2020Feb 2020Mar 2020Apr 2020May 2020Jun 2020Jul 2020Aug 2020Sep 2020Oct 2020Nov 2020Dec 2020Jan 2021Feb 2021Mar 2021$20$40$60$80$100Under 38 J/TH38 to 60 J/TH60 to 100 J/TH100 J/TH or moreHashrate Index,2021Cambridge Judge Business Sch

156、ool,2020HydroelectricOilNatural gasNuclearCoalSolarWindGeothermalAsia PacificLatin America and the CaribbeanEuropeNorth America65%65%38%23%12%12%12%8%60%20%33%7%7%13%10%067%017%033%17%0061%28%44%22%22%17%22%17%Czech RepublicNetherlandsAustraliaItalyUKFranceGermanyCanadaRussiaUS125.9%75.1%35.5%27.9%2

157、7%18.3%15.5%15.4%8.8%2.1%THE PROFITABILITY OF MINING DEPENDS ON TRANSACTION FEES,HARDWARE EFFICIENCY AND ENERGY CONSUMPTIONMining profitability of bitcoin for one terahash($per day)Jan 20May 20Sep 20Jan 21May 21Mar 20Jul 20Nov 20Mar 21Jul 21Sep 21Feb 20Jun 20Oct 20Feb 21Jun 21Apr 20Aug 20Dec 20Apr 2

158、1Aug 21Oct 21BitInfoCharts,2021BTC.com,20210.150.070.120.360.130.110.220.230.120.090.240.240.340.150.080.270.360.360.080.130.390.350.38Digiconomist,2021Jan 20May 20Sep 20Jan 21May 21Mar 20Jul 20Nov 20Mar 21Feb 20Jun 20Oct 20Feb 21Apr 20Aug 20Dec 20Apr 2113.815.5514.7213.7316.9519.318.6721.4323.1416.

159、5516.117.3517.3516.7920.6121.4520.6119.93In crypto mining,computers attempt to solve mathematical problems by continually trying new numbers(called nonces)in an equation.Computers win mining rewards by finding a nonce that,when plugged into the equation,gives an answer that matches an answer present

160、ed at the outset.A hash is the term for one calculation usinga random nonce to find the correct answer.Aterahash is 1 trillion of these calculations.What is a terahash?R A C O N T E U R.N E TC R Y P T O C U R R E N C I E S1312ny citizen or business in the UK can choose to be a payment anarchist.They

161、 can ignore the fiat currency and request payments for products or services in whatever form they like,beit cowrie shells,cabbages or bit-coins.What they cant do is require monetary debts to be paid in cowrie shells,cabbages or bitcoins.If a creditor wont accept legal tender,it cant sue for non-paym

162、ent.That might not sound momen-tous,but it is a big anchor for the value of a fiat currency.Legal ten-der is also a liability of the central bank.Commercial banks create most of the money people use,but trust in the state stands behind it.The existence of legal tender is what makes money money.That

163、is,a store of value,a unit of account and the medium of exchange.By that definition,private crypto assets cannot be money,despite and much to the horror of the International Monetary Fund El Salvadors decision last year to make bitcoin legal tender.Bitcoin is backed only by speculation and which lin

164、k peoples bank accounts to a digital wallet,China is already close to being cashless.Many busi-nesses have already chosen to stop accep ting notes and coins.“In addition,China is opposed todecentralised digital cur rencies such as bitcoin which was banned last year.So this is its answer to crypto,”H

165、su says.China is not the only jurisdiction that has an uneasy relationship with cryptocurrencies.Facebooks Diem digital currency project was stopped short partly because of regulatory objections in the US.Huge private platforms on which most people live their economic lives 1 billion Chinese citizen

166、s use Alipay are,arguably,a threat to monetary stability if their trans-actions use a private crypto asset.There is probably another factor in Chinas adoption of a CBDC:data.About 10%of consumer loans were made through Alipays app Bloomberg/Contributor via Getty ImagesWhat does Chinas new central ba

167、nk digital currency indicate about the future of private crypto assets andthe potential disintermediation of traditional financial services?Beijing versus bitcoin:how the world can learn from the digital yuanOuida Taaffethe argument(or hope)that cur-rencies can do without financial intermediaries an

168、d state over-sight.But wild swings in the valua-tion of fashionable assets are nothing new,of course.“I am inclined to place crypto-currencies in the same bracket as tulips with the exception of cen-tral bank digital currencies,that is.”So says Charles Taylor,a visiting scholar at the GW Law School

169、in Washington DC and a former deputy comp-troller for capital and regulatory policy at the US Department of the Treasury.Hes referring to one of the first asset bubbles on record,inwhich the price of tulips in the Netherlands rose twentyfold dur-ing the mid-1630s before crashing.The only large econo

170、my that has launched a central bank digital currency(CBDC)is China,which unveiled its digital yuan the e-CNY at the end of last year.But others are not far behind:a 2021 poll by the Bank for International Settlements found that 86%of cen-tral banks were“actively research-ing the potential”of CBDCs.T

171、he e-CNY aims to be retail“dig-ital cash”and it is fully backed by the Peoples Bank of China(PBoC).Choosing to replace cash and not bank accounts is an important step.It ensures that commercial banks wont be disintermediated and it spares the PBoC a headache:offering consumer accounts and deciding w

172、ho gets to borrow what.Beijing has decided that interest can be paid only on bank deposits,not on the e-CNY itself.Banks are also the only institutions that can convert e-CNY into deposits and pay it out again as cash.Statista,2021DIGITAL PLANETCountries exploring,developing or issuing central bank

173、digital currencies in April 2021 Many of the suggested benefits ofa CBDC in terms ofinternational payments may be illusorybefore Beijing took action in light of the state-owned banks com-plaints that lower costs of capital and lighter regulations had given Alipay an unfair edge over them.But the big

174、 platforms also had another advantage.Because they had largely relegated commercial banks to funding pipes,they pos-sessed vast amounts of data that the state-controlled banks did not.In 2021,Chinas industry regula-tors obliged Alipay to spin off its lending businesses,Huabei,which offers consumer c

175、redit,and Jiebei,which provides small unsecured loans.With them went the data that they had gathered.Yi Xiong,Deutsche Banks chief economist for China,wrote in a res-earch note that the e-CNYs design gave Chinas big banks“an entry point to break into a business dominated by big tech firms”andthat th

176、is would transform the nations payments sector.Having a digital yuan that puts the commercial banks front and centre in payments,and opens up the sector to new competitors,is certainly a step away from private big tech.But its arguably also a step closer to big state.“Cash is wonderfully anonymous a

177、nd incredibly convenient,”Taylor says.“That anonymity might be a disadvantage to an autocracy and a reason for a country such as China to introduce a CBDC.”Beijing says that the e-CNY will offer“controllable anonymity”,but what does that mean in practice?Hsu says:“The authorities can see which walle

178、t the digital yuan is in and wallets are tied to individuals.”The authorities will be able to trace transactions and conduct checks for anti-money-laundering and know-your-customer compli-ance.Users can opt to be anony-mous to counterparties.Some have argued that this will be a disadvan-tage for onl

179、ine platforms.One of the most frequently cited advantages of CBDCs is that they could remove friction from the notoriously sclerotic international payments market.But Taylor is not sure that this would be the case.“Many of the suggested benefits of a CBDC in terms of international payments may be il

180、lusory,”he says,pointing out that the system involves navigating different time zones and various legal and insti-tutional histories.“If I send money from the US to India,it has to go from a US bank to an Indian bank.Im not sure a CBDC really gets around the insti-tutional issues,”Taylor argues.Chal

181、lenging the dollars status as the dominant reserve currency hasalso been mooted as a reason for the e-CNY.China is the worlds biggest producer of rare earth metals,which are in particularly high demand as raw materials for rechargeable batteries and other electronic equipment.Could it be moving to d

182、e-dollarise the trade in rare earths?“It is possible,”Hsu says.“But the digital yuan is like cash,so that would probably take second place to normal account transfers.”She adds that its also unclear how the digital yuan could be tracked across borders or whether it will be able to collect the ID inf

183、ormation of citizens overseas.Taylor is similarly sceptical about the idea that the e-CNY will expand the footprint of the yuan in interna-tional trade.“The global system for dollar payments is highly effi-cient,”he says.“The network ef-fects in these things are so strong that the conventions of usi

184、ng the dollar,or Swift,are hard to over-turn.Generally,cryptocurrencies might make sense in places where there is great distrust of govern-ment institutions.Central banks in the OECD are generally trusted.”Taylor also doubts that central banks will find their hands forced by the growing use of crypt

185、o.“Lots of transactions are already beyond their direct reach,”he says.“But,as long as some component is controlled and the relationship between that and the rest is predict-able and doesnt change rapidly,there isnt really a problem.”Commercial featuret wont have escaped your attention that big chan

186、ges are happening on the inter-net.The rise of blockchain technolo-gies,the decentralised internet and associated wonders like the metaverse and NFTs have all created a revolution in the digital sphere.Web3 is well and truly upon us.“Web3 is unique in that its a kinetic version of the internet,”says

187、 James Saward-Anderson of Social Tree Global,a marketing consultant that specialises in the Web3 space.“Its truly going to be an experience-based internet in which users will spend a good deal of their time.”Whereas Web 1.0 was the genesis of our digital world and Web 2.0 saw the rise of big tech ti

188、tans such as Facebook,Instagram,Google and Amazon,Web3 promises something different.“Web3,when you boil it down,is the semantic web and blockchain technology,”says Saward-Anderson.Its a coming revolution in the way we work,rest and play that forward-thinking Whats the Web3 opportunity for brands?Its

189、 the most significant shift in the digital space for a generation,but how do you keep up?brands will need to keep on top of in order to stay relevant.Yet with any enor-mous shift in foundational technology,theres always the question of when to act.Act quickly and you gain first-mover advantage,but r

190、un the risk of put-ting your resources behind a format or standard that may well be overlapped by second generation ones.(Its a risk anyone who backed Betamax in the video format wars of the 1970s and 1980s will know all too well.)However,Social Tree Global sug-gests moving sooner rather than later.

191、“The first use case possible is around brand building,”says Max Hannah of Social Tree Global.Were in an atten-tion economy,where people are bombarded with messages.“How can brands stand out and build thought leadership in this space?”One way to do so is to enter key areas of Web3 such as the metaver

192、se.An immersive digital space backed by the likes of Facebook parent company Meta and Microsoft,the metaverse if it lives up to its potential has the promise to change the way we live.Plenty of organ-isations are recognising that and realis-ing the benefits of being among the first to move into the

193、space.JPMorgan has its own lounge in the metaverse,which it intends to use to attract clients,while many other big brands including Samsung have established shops within virtual worlds that they hope will not only sell products,but sell their brands to tech-savvy consumers.Many brands that Social Tr

194、ee Global works with want to reach clients in the C-suite and are choosing to send execu-tives invites to metaverse-based experi-ences,rather than webinars.Others are also shifting remote-working practices into the metaverse to meld the best of the physical office and the work-from-home mentality fo

195、r their staff.“The ones who do remote working the best are the ones that can collaborate and build meaningful relationships at scale across different countries,”says Hannah.“For remote working,virtual reality and the metaverse offers a great way for big companies with thousands of staff to work and

196、collaborate.”But its not just the metaverse that holds plenty of promise.The under-lying technology powering much of Web3,including the metaverse,is the blockchain.The blockchain,an immutable,indestructible database of records,is often used with NFTs,or non-fungible tokens.“In the past you would sen

197、d a hamper to people,or invite them to dinner,”says Saward-Anderson.“With NFTs,you can build scarce assets,which you can give to your audience and you can have experiences.”Navigating the world particularly as it evolves and takes shape is a challenge,but one that Social Tree Global has experience i

198、n.“Our agency is focused on the next frontier of account-based marketing and its all about using immer-sive experiences,social media,VR and augmented reality,and building digital communities,”says Saward-Anderson.Get in touch today to learn more about how to explore the promise that Web3 offers.For

199、remote working,virtual reality and the metaverse offers a great way for big companies with thousands of staff to work and collaborateIC E N T R A L B A N K D I G I TA L C U R R E N C I E SAWhile other countries continue to consult and test,why has China been so quick out of the traps?“To cater to it

200、s peoples needs as they use cash less and less,”says Dr Sara Hsu,associate professor of supply chain management at the University of Tennessee,Knoxville,and the author of Chinas Fintech Explosion:disruption,innovation and survival.She points out that,because of the widespread use of Alipay and WeCha

201、t Pay,both of Currency issuedPlanning to issue currencyExploring currencyI am inclined to put cryptocurrencies in the same bracket astulips with theexception of centralbank digital currencies,that isR A C O N T E U R.N E TC R Y P T O C U R R E N C I E S1514Commercial featurerecent survey conducted b

202、y Industry Dive and Fireblocks the markets leading digital asset custody,transfer,and settlement platform revealed that 70%of finan-cial institutions are already embrac-ing crypto in some form.This figure is expected to rise further in 2022 on the back of a record-breaking year for the cryptocurrenc

203、y sector.The question is not if institu-tions will embrace digital assets,but when.“We think every business will be a crypto business at some point,”says Andrew Han,director of business research at Fireblocks.Yet while many in the market are famil-iar with the likes of Bitcoin and Ethereum,the poten

204、tial application of the technol-ogy underpinning these digital assets extends much further,says Han.The ability to virtualise traditional assets using blockchain infrastruc-ture a process known as tokenisation offers a viable route for many finan-cial firms to meet the growing demand from clients wh

205、o expect to have access to crypto,even at an institutional level.Unlocking the crypto market for financial institutionsFinancial firms are preparing to fully embrace digital assets and it is essential that they bring those offerings to market in a fast,secure and scalable way“Financial firms are rea

206、lising that bringing crypto to their customers is not just going to be about Bitcoin,but more about these other use cases,”adds Han.“There is an amazing story emerging about how this can be achieved seri-ously by institutions who want to help clients get better returns,hedge against inflation and sa

207、fely access emerging markets such as NFTs and Web3.”Accelerate speed-to-market by learning from early adoptersThe digital asset market is built around speed:speed of transactions,settle-ment,confirmations and,most impor-tantly,innovation.While its not a zero-sum game,being first or early enables an

208、institution to compete on innova-tion instead of pricing and features.And those customers are increasingly looking for crypto exposure,yield,NFTs and new ways of transacting.“If you look at some of todays big-gest institutional crypto players and fintechs,youll see theyve had to deal with every cust

209、ody,security,opera-tional and scalability issue imaginable.The crypto markets have been phe-nomenal for these early adopters,but the lessons learned are meaningful and can benefit new participants entering the space,”Chris Jameson,director of enterprise programs notes.Today,over 1,000 institutions h

210、ave utilised Fireblocks to launch crypto trading and lending products;accel-erate client access to DeFi,staking and NFTs;and streamline back office crypto operations.“By partnering with us,these firms are future-proofing their infrastructure.We have our finger on the pulse of customer demand and are

211、 continuously updating our platform to support new use cases,”Han notes.Keeping up with customer demand and operational scaleFirms should also consider what their clients are actually asking for.Companies often start with a custo-dy-first mindset by selecting a cus-tody partner or developing an in-h

212、ouse custody solution,but quickly encoun-ter problems trying to keep pace with customer expectations.“Institutions are expected to deliver the same level of customer experi-ence that their customers have grown used to.A client might start with retail trading of a few tokens or stablecoin payments,bu

213、t that is only the begin-ning,”Jameson explains.“Your cus-tomers will soon start asking for more token and blockchain support,access to DeFi,access to NFTs and gaming,as well as on-and off-ramps for their crypto.At Fireblocks,we have seen the custody-first scenario countless times where teams have t

214、o re-platform because the use case,market or cus-tomer needs change.”Companies starting off on the cus-tody track often need to commit even more time,money and resources.Constantly trying to keep pace with the market requires a retrofit of the existing infrastructure when taking the custo-dy-first a

215、pproach.Thats why finding a technology partner that is able to sup-port any use case is a top priority.It enables companies to create a lean but scalable digital asset infrastructure so they can focus on delivering new prod-ucts and growing their business.For more information please visit Constantly

216、 trying to keep pace with the market requires a retrofit of the existing infrastructure when taking the custody-first approachTHE STATE OF FI CRYPTO ADOPTION IN 2022The percentage of organisations that say they are at the following stage with respect to their digital asset journeyACreating Strategy/

217、Point of ViewLaunching a proof of conceptProof of Concept underwayDeveloping production-ready offering/solutionHave launched a client-facing offering/solutionExpanding current client-facing offering/solutionNo plans for digital assets24.14%9.48%10.34%9.05%9.05%9.48%28.45%Fireblocks,Industry Dive,202

218、2ancy a side of bitcoin with your burger?Earlier this month,US fast-food chain Shake Shack piloted a scheme that offered cus tomers cryptocurrency rewards via a digital wallet.The promotion meant that any Shake Shack purchase made by Cash App debit card users would earn 15%back in the form of bitcoi

219、ns.Explaining the experiment to The Wall Street Journal,the com-panys chief marketing officer,Jay Livingston,said that the reward scheme was designed to attract consumers who were curious but hesitant about crypto.“If we just started taking crypto right now at our kiosks,it would have very low adopt

220、ion,”he said.“But through someone like Cash App,whos been promoting it,you will get some more people who want it and also want to learn.”Burger King also put crypto on the menu at the end of last year when it joined forces with invest-ment platform Robinhood to start the BK Royal Perks rewards pro-g

221、ramme.For a limited time,Burger King customers could enter to win 20 bitcoins,200 ethereum or 2 mil-lion dogecoins if they spent more than$5(3.80)in store or online.But its not only fast-food joints that have been serving up crypto.While the number of UK retailers offering crypto rewards is still sm

222、all,LK Bennett,Glossybox and Myvegan are among those offering bitcoin cashbacks of up to 10%through the fintech app Mode.Bridging the gap between crypto-currency and traditional loyalty programmes,crypto rewards offer retailers another way to connect with fickle consumers who are becoming less attac

223、hed to specific brands and more likely to shop online or via social media.The idea is that,rather than col-lecting a retailers in-house points that can only be spent in one store,consumers earning rewards in crypto will be able to spend that currency at an increasing range of outlets,invest it or us

224、e it to pur-chase non-fungible tokens.According to trends forecaster WGSN,crypto rewards are set to be a hot trend in 2022.In an increas-ingly competitive retail landscape,they are a way for brands to differ-entiate themselves.“Crypto is new,its exciting and its interoperable,”says WGSNs global head

225、 of insight and life-styles,Joe McDonnell.“Offering loyalty schemes in cryptocurrency is one way to quickly modernise your brands image.”WGSNs research suggests that consumer interest in crypto is peaking,he says,adding that this is especially true for generation Zers,who feel that they are being“lo

226、cked out”of traditional finance.Theres no doubt that they spend more time online than any other generation.And social networks have reinvented how consumers in their teens and early 20s obtain financial guidance.On TikTok and YouTube,videos explaining how to play the crypto markets by influ-encers s

227、uch as BitBoy Crypto and TheBlockchainBoy rack up hun-dreds of thousands of views.CryptoWendyO runs one of the largest female-led crypto channels on YouTube,with 159,000 sub-scribers.She notes that gen Zers are“very interested in crypto because they are the most tech-savvy gener-ation”,adding that d

228、istrust in pub-lic institutions such as governments and banks is also driving younger people towards cryptocurrencies.“Yes,crypto does have risks,but so does traditional finance,”she says.Younger people may well be more interested in crypto,but its diffi-cult to find verifiable statistics on how man

229、y of them have invested.The Financial Conduct Authoritys Cryptoasset Consumer Research 2021 report estimates that 2.3 mil-lion UK adults hold crypto assets and users tend to be men aged over 35 in the AB social grade,covering managers and professionals.Its no secret that bitcoin is sub-ject to price

230、 volatility drops of up to 50%are not uncommon which can be devastating for investors.McDonnell points out that the ability to earn rewards in crypto can serve as a way to dollar-cost average an investment strategy that aims to dampen the impact of volatility on financial assets.Rewards also mean th

231、at consum-ers can gather coins even when the market is in a downturn,which is“akey source of the appeal”.But he adds:“Retailers that are thinking about offering crypto rewards should consider the risks that their customers could lose their coins.”For the crypto-curious,bitcoin rewards are a way to p

232、assively earn cryptocurrencies without actually buying them.Potentially,they will appeal to everyday shoppers who want to accrue bitcoin without the individual risks of investing.But thats not to say crypto rewards are without risk.David Gerard is a cryptocurrency expert and author of Attack of the

233、50 Foot Blockchain.He believes that there is potential for these schemes to act as a gateway drug into the complex and unregulated cryptocurrency market.“Crypto is really hard to use,”Gerard says.“Its clunky and very few businesses accept it as pay-ment.So people will try to turn these rewards into

234、actual money.”The result,he warns,will be a lot of people having a“very painful experience”with cryptocurrency.“The success of crypto rides on the bitcoin bubble,which is the price of bitcoin being up.For that,you need mainstream adoption.The problem is that the demand for it isnt massive,”Gerard ex

235、plains.“People are trying to sell magic beans for real money.”Many banks view crypto as high risk because of its potential to be used for money-laundering and other crimes.HSBC,the UKs larg-est bank,is among those that pro-hibit transfers to cryptocurrency exchanges and digital wallets.Last year,the

236、 Financial Conduct Authority said that it would ban Binance from operating in the UK,prompting several banks to pre-emptively block transfers to the crypto trading platform.In the US,President Biden recently signed an executive order seeking to regulate cryptocurrencies.Any cryptocurrency income,inc

237、luding free reward coins,may also be considered taxable.Then there is the issue of hacking or losing private keys.Remember Stefan Thomas,who lost a bitcoin stash worth$220m(167m)after forgetting his password?Or James Howells,who dumped an old hard drive that held his bitcoin private key,worth hundre

238、ds of millions?Many people still view bitcoin as an internet peculiarity,and it remains to be seen whether loyalty reward schemes will help to legi-timise crypto.But perhaps their use by brands as prominent as Shake Shack and Burger King may be enough to flip perceptions.Bloomberg/Contributor via Ge

239、tty ImagesIn a fragmented retail market,customer loyalty is particularly hard to win and easy to lose.Crypto cashback schemes could provide a more effective enticement thantraditional reward programmes but they do pose risksCan crypto rewards win over gen-Z consumers?Abigail EdgeYes,crypto does have

240、 risks,but so does traditional financeT R E N D SFWILL CREDIT CARDS OFFERING REWARDS IN CRYPTOCURRENCY CATCH ON?US adults who possess a credit card offering crypto rewards or are interested in having one,by age groupWhat should we be trying to achieve with regulation?Our vision is to have a joined-u

241、p approach to regulating different activities and market par-ticipants in the UK.We saw some-thing in this vein in the US with Joe Bidens executive order calling on government departments to cooper-ate and so make better policies.In the UK,agencies are trying to use existing policy and case law that

242、 is not easily applicable to this indus-try.Take,for instance,consumer protection:the current proposal is a blanket ban on consumer-targeted adverts for crypto products and services,even though the median investment for retail crypto inves-tors in the UK is only 300.The use of existing regulation by

243、 the Financial Conduct Authority(FCA)is harming competition and failing to protect consumers effec-tively.A full ban on advertising is not a proportionate response.If regulation is not balanced and proportionate,the UK will lose out.First,we lose out on the macroeco-nomics of what could be a thrivin

244、g industry.Second,we still cant pro-tect consumers,because companies are offshoring to crypto-friendly ju-risdictions,where they are still able tosell into the UK.Were victims of jurisdictional arbitrage.Are there principles that the regulators should work to?First,along the lines of what Ive just m

245、entioned,we need a risk-based approach.A full ban on retail consumer advertising when the median investment is 300 is not risk-based.If that figure were 300,000,then yes,maybe we would need something heavier-handed.But,despite the rhetoric,the current regulatory approach is not risk-based and the re

246、sponses are not proportionate.We must also remain technology-agnostic.In Europe,for example,theres talk of being risk-based and technology-agnostic,but then ideas such as banning proof-of-work have gained a lot of traction.The proof-of-work concept underpins about 80%of the current blockchain transa

247、c-tions,anda lot of those node opera-tors and block producers are in Europe.A blanket ban would deci-mate the crypto ecosystem.Again,that is not a proportionate measure.If regulation is not balanced and proportionate,the UK will lose outI N S I G H TIan TaylorExecutive director,CryptoUKA Q&A with Ia

248、n Taylor,executive director of CryptoUK,on the urgent need for improvements to how the sector is regulatedWe are seeing huge shifts to renewa-bles,especially as miners move toEurope and North America.Now,about 60%of all bitcoins are mined with renewable energy resources.Lastly,there needs to be some

249、 engagement with the industry the people with expertise.There is a lack of knowledge and understanding atthe FCA.Its doing what it can,but it is under-resourced.The engage-ment has to happen higher up the ladder at Westminster.What is the next key step for crypto regulation?We need something positiv

250、e to happen.The UK must come out and do what Biden did.Policy people in the US all know that exec-utive orders like Bidens dont have any teeth.Its grandstanding,yet it sends a positive message.And we know this messaging is important to the industry from the conversations weve had with venture capita

251、lists.The UK is attractive for entrepre-neurs and investors.Its easy to set up a business here,w ehave good rule of law and access to capital.But all of that is being undermined in the crypto sector by a lack of clarity on regulation and long-term govern-ment policy.As a next step and its urgent we

252、need some grandstanding from Westminster.If this doesnt happen in the next six months,it will be too late.The UK will have gained a repu-tation as a regulatory environment that stifles innovation,prompting companies to set up offshore.In fact,this is already happening.We need some strong vocal suppo

253、rt from the government and we need it soon.16%5%16%7%18%5%12%7%9%4%8%4%65+55-6445-5435-4425-341824Interested in a card Possess a cardFinder,2022AQAQAQAR A C O N T E U R.N E TC R Y P T O C U R R E N C I E S1716Commercial featureCentralised and decentralised systems meet in the new world of financeCom

254、bining regulated access to decentralised finance with mainstream,traditional banking and payments processes will unlock financial freedom and revolutionise global economiesor many people,the global financial crisis in 2008 was a stark realisation that tradi-tional banking is broken.Built on old,inef

255、ficient and slow technology,legacy banks are blighted by high operating costs,obsolete pricing models and expensive cash handling.A system which deems negative interest rates on hard-earned money as acceptable is barely fit for purpose.Despite the rapid rise of fintech startups following the financi

256、al crisis,if anything the traditional banking system has become more sluggish and frag-mented,as it is determined to protect legacy revenue streams.Its no wonder consumers have sought alternative options for trading and finance that dont involve going to a legacy bank for loans,as well as alternativ

257、e assets which diversify savings away from tra-ditional stock and bond investments.As is to be expected in an increas-ingly technology-driven world,digital assets are garnering particular atten-tion.Decentralised finance(DeFi)ena-bles users to not just store,exchange and trade cryptocurrency assets

258、but also earn interest on them,with rates as high as 19%,and lend or borrow against them peer to peer.With no need for intermediary financial third parties to govern and process trans-actions,it is more efficient and fluid as well as cheaper.“There will be ever more ways to buy,trade and sell digita

259、l assets,”says Brad Yasar,CEO of EQIFi,a decentralised protocol enabling DeFi and seamless cross-platform trans-actions.“Even financial institutions,historically slow to adapt,now clearly see the opportunity to hold and profit from alternative digital assets such as cryptocurrencies.However,we also

260、need to see regulators be more nimble and responsive to these rap-idly evolving opportunities.”DeFi offers a way to democratise access to financial products that tradi-tional banking and financing solutions have not been able to provide.But in a nascent market,in which regulators have been slow to a

261、dapt,digital asset consumers have faced limited options for securing custody and banking level access to assets.Demand is high for professional,secure and convenient digital channels for their day-to-day banking activities worldwide.A volatile economic climate over the past couple of years has opene

262、d peoples minds to DeFi-based bank-ing and services even further,but while most regulators are no longer trying to deny DeFi,they have not been forthcoming with solutions for regulated access.Used to dealing with traditional financial institutions,they are not nimble enough for the pace of the DeFi

263、markets,which is holding valuable products back from being mainstream.One innovative company,however,is leading the way in bringing more transparency and accountability to the DeFi world.Optimised for real-time digital interactions,EQIFi is built to meet the expectations of consum-ers keen to embrac

264、e the evolution of digital technologies.Through block-chain technology,EQIFi democra-tises financial products previously only available to the privileged few,delivering more products than other decentralised systems.Crucially,EQIFis platform is not just secure in itself but it is the only DeFi proje

265、ct globally that is powered by a licensed and regulated bank,giving people the confidence and assur-ance to embrace the opportunities of DeFi.That bank is EQIBank,which has been recognised among the top digi-tal banks to watch alongside the likes of Monzo and Chime.“EQIFi welcomes regulatory over-si

266、ght,”says Jason Blick,CEO of EQIBank.“Measured,responsible reg-ulatory oversight can only be a good thing for the industry as a whole.”A regulated and licensed global bank partnering with a DeFi platform is bringing forward the future of com-munity banking,driving the shift from anonymous,high-risk

267、DeFi platforms to safer,more transparent versions that non-crypto and non-technical people can benefit from.By bridging the gap between DeFi and traditional finance,the partnership will help unlock greater financial freedom as consumers can integrate digital assets into their everyday lives.As well

268、as being a decentralised pro-tocol for pooled lending,borrowing and investing for digital assets,the single uniform platform offers access to EQIBank accounts,custody,debit and credit cards,OTC and wealth management.It solves the problems of negative interest rates and the yield on traditional banki

269、ng products,while giving those already in the DeFi space access to crypto-friendly digital bank-ing.The result is one single market-place for investors to access fixed and variable-rate lending products,and DeFi interest rate swaps.Combining DeFi,crypto and tradi-tional payment rails will usher in a

270、 new era of people-led finance.The future of finance is not centralised or decen-tralised its both,in a single platform that consumers can incorporate into their everyday lives.Bridging the two worlds offers a fairer,more efficient financial system and will bring finan-cial access to millions of the

271、 currently unbanked,while forcing the tradi-tional banks to increase their value to the public.“DeFi currently attracts a relatively dedicated user base,but EQIFi is set to change that,”says Yasar.“The future of DeFi will include new,innovative tools like yield aggregators and inter-est rate swaps,i

272、ntegrated seamlessly with a licensed and regulated digital bank for the best user experience,such as EQIFi.DeFi is already afford-ing wealth preservation and growth on an unprecedented level worldwide,outside of the outdated,archaic con-straints of legacy institutions,and we fully expect this trend

273、will continue and grow in the years ahead.“We also expect to see DeFi evolve in other exciting areas.Democratising more sophisticated financial products like interest rate swaps will be a game changer.I anticipate seeing more bridges emerging between DeFi and regulated and licensed digital banks,fac

274、ilitating the ease of access and use for people worldwide in the new world of finance.”For more information,visit DeFi offers a way to democratise access to financial products that traditional banking and financing solutions have not been able to provideFCollateral thinking:why lenders are treating

275、crypto as a way to reduce risknnovations in decentral-ised finance(DeFi)have already shown how using blockchain technology for finan-cial services can offer an alterna-tive to conventional offerings.From savings accounts and insur-ance to securities trading,DeFi technology has opened up a whole rang

276、e of services that fintech start-ups can offer.One of the fastest-growing areas of DeFi is cryptocurrency-backed loans.Just as traditional financial institutions offer secured loans in fiat currency against a house or car,a crypto loan is secured using cryptocurrency as collateral.Unlike conventiona

277、l loan prod-ucts,cryptocurrency-backed loans use smart blockchain contracts togovern the loan and cannot be altered by a third party.“Crypto investors are frequently praised for taking the Hodl hold on for dear life approach to invest-ing.But the manner in which one loans through a central company.F

278、irms such as BlockFi,Celsius,YouHodler and CoinLoan provide loans in the centralised finance space and offer users similar bene-fits to DeFi,but with the customer experience and strong security of conventional financial companies.In a short space of time,many platforms have reported extremely high g

279、rowth in crypto lending.For example,CoinLoan saw crypto-backed loans increase by 2,000%in 2021,mirroring the strong year for crypto in general.As these plat-forms continue to grow,are large financial institutions at risk of losing customers to them?For Ilya Volkov,co-founder and CEO of cryptocurrenc

280、y exchange and lender,YouHodler,the rise of crypto-based lending does not present any threat to traditional lending markets.“Technically speaking,crypto-based lending is a form of tra-ditional pawn-shop loan,where crypto is used as a form of collat-eral,”he says.“This means that we speak not about d

281、isruption or com-petition with legacy businesses,but about some kind of an exten-sion to them.”When its compared with tradi-tional financing,which dates back hundreds of years,there is no question that crypto lending is still a new industry.But as adoption grows with a survey by research firm Piplsa

282、y finding that 49%of millennials own cryptocurrency it may not be long before custom-ers and high-street banks consider crypto loans.“At this moment its a hustle to borrow money from a bank,”says Alex Faliushin,founder and CEO of crypto lending platform CoinLoan.“Crypto loans allow anyone with funds

283、 to borrow money instantly and to be a lender as well,giving healthy returns in comparison with holding money in the bank.”The account-opening process at an exchange or crypto lending platform is also usually simpler and more innovative when com-pared with bank accounts.It may be some time before cr

284、ypto loans reach their full potential and consumers feel comfortable with this relatively novel financial product.But the benefits for crypto owners in securing a loan against their holding could be too attrac-tive to ignore.“In time,we will see more and more ways to use crypto lending platforms to

285、have the best utility for your money,”Faliushin says.“The use cases will develop in time with the industry.”Cryptocurrency-backed finance is fast becoming a genuine alternative to conventional bank lending.Whats making it so popular with consumers and what are the drawbacks?borrowers to provide addi

286、tional capital should the crypto price fall below a set value.“Its imperative that those inter-ested in using crypto loans under-stand the rules of the smart contract and scrutinise the fine print,just as one would with a traditional loan,”DeCicco says.Although regulators around the world are starti

287、ng to set cryptocur-rency regulations,a lack of clear and comprehensive guidelines has created a difficult operating envi-ronment for many crypto loan platforms.In February,for exam-ple,a subsidiary of major crypto platform BlockFi called BlockFi Lending LLC was alleged by the US Securities and Exch

288、ange Commis-sion(SEC)to be offering a product that was illegal.According to the SEC,it had not registered the BlockFi Interest Account lending product as a secu-rity and had also failed to repre-sent that products risks accurately.Although the crypto platform did not agree with the allegations pre-s

289、ented by the SEC,it did approve payment of a$100m settlement charge the largest penalty for a crypto enforcement action to date.“One main reason for scrutiny focused on lending rather than trading in general is that lending is multifaceted,”DeCicco says.“Without clear regulation,crypto lending compa

290、nies are not held to the same standards of reporting.There is very little disclosure about whats going on behind the scenes.”From a regulatory perspective,more is needed for these platforms to thrive.At the moment,they arent required to meet certain banking regulations and also they arent covered by

291、 any form of deposit protection or financial services compensation scheme.It means that a platforms users have little recourse if it were to fail.A number of firms have sprung up in recent years to offer crypto Without clear regulation,crypto lending companies are not held to thesame standards ofrep

292、ortingFinbarr ToeslandL E N D I N GIHodls can vary greatly,”observes Nicole DeCicco,the founder and owner of CryptoConsultz.“Hodlers will often consider,and participate in,crypto lending and staking platforms in order to earn interest on their investments.Although this isnot without risk,the bene-fi

293、ts ofsuch platforms are unargua-bly impressive to say the least.”Its not difficult to see why bor-rowers are becoming increasingly interested in crypto loans.These give access to relatively low inter-est rates on repayments,provide practically instant funding and require no credit checks.Data from C

294、oinMarketCap indicates that the global market capitalisation of all crypto assets,including bitcoin and ethereum,is close to$1.8tn,illustrating the market potential for crypto loans.Other estimates have been significantly higher.For so-called crypto whales (people who have millions upon millions in

295、crypto in their digital wallets),lending their crypto via online platforms can provide them with fiat currency from interest,without attracting the same level of taxes that selling their crypto could attract.But,as with many financial prod-ucts,taking out such a loan is not without its risks.Bitcoin

296、 and other cryptocurrencies are well known for their high volatility.Within days,their value can increase sub-stantially or collapse.Because of this inherent instability,crypto loans typically have an extremely low loan-to-value ratio and require 36.04bnDeFi Pulse,2022The total locked value of the l

297、ending segment on the ethereum blockchain as of January 2022R A C O N T E U R.N E TC R Y P T O C U R R E N C I E S1918NFTs could be used as evidence of ownership of an item a concept that has“been talked about quite a lot”,Guadamuz says.This could help the technology to gain even more mainstream acc

298、eptance in the coming years.So-called asset management is already being used in video games.Players gain an NFT associated with an item that they purchase in one game,which they can port over to another version of the game or a sequel.Such technology could soon be the norm in the wider world.“It cou

299、ld be used as some form of evidence of property or digital assets in the metaverse,if that actu-ally takes off,”Guadamuz says.If the metaverse is to deliver on the aspirations of proponents such as Mark Zuckerberg,this could be key.A billion of us could end up in the metaverse by the end of the deca

300、de,in Zuckerbergs vision of the future comes true.If so,knowing who owns what in this virtual environment would be more important than ever.on-fungible tokens(NFTs)have propelled themselves into the mainstream.While many of us have become familiar with artwork such as the Bored Ape Yacht Club,the te

301、chnology has much broader potential.NFTs are entries on blockchain,a distributed database of records that assigns value to items.The market for NFTs has,in essence come out of nowhere.The volume of NFT sales surged from$82m(62m)in 2020 to$17.6bn in 2021,according to LAtelier BNP Paribas.The number o

302、f people buying NFTs increased over the same period rocketed from 75,000 to 2.3 million.Nadya Ivanova is chief operating officer and foresight lead at LAtelier BNP Paribas.She says that 2021 was“a breakthrough year for NFTs in terms of the volume and value of transactions;the interest of main-stream

303、 brands;the emergence of new digital communities;and the tens of billions of dollars of funding that went into projects”.While NFTs entered the cultural conversation last year through art projects,they seem poised to extend well beyond their artistic origins.The reality is that NFTs can be applied i

304、n any number of areas and used to represent anything not just artwork.Here are five new use cases.Headline goes hereNFTs are part of the so-called Web3 concept,a new vision for the future of the internet built on the idea of collectivism.Web3 envisions a decentralised internet,where no single person

305、 or entity holds undue power over the others.The ethos is meant to be community-minded and egalitarian.Because NFTs are built on the blockchain that helps decentralise the internet,they sig-nify that sense of commonality.“The most important potential future application of an NFT will be its use as a

306、 community token,”pre-dicts Dr Andres Guadamuz,a reader in intellectual property law at the University of Sussex,who has stud-ied NFTs.“It acts as an identifica-tion point for communities.”There are already some examples of this concept in action.Although theyre closely tied to the NFT art sector,th

307、ey could become more widespread.Guadamuz points to the Bored Ape Yacht Club perhaps the most famous NFT art collection of all,which has attracted celebrity collectors including Jimmy Fallon and Paris Hilton.Granted,they possess the rights to the artwork,but they really own the associated token,which

308、 has a deeper meaning,Guadamuz argues.“This is a token that serves as an invitation to enter spaces that would otherwise be closed,”he says.“This aspect for community manage-ment and for identification manage-ment has a lot of potential.”NFTs could become vital for asset management in the metaverse,

309、then,but what about those tricky moments before you decide to buy?“There is huge potential for NFTs in the fashion and beauty industry,especially when we consider that everyday consumers will soon pos-sess digital personas.”Thats the view of Alice Chang,founder and CEO of fashion tech company Perfec

310、t Corp.“Consumers will use these digital personas to experience and explore the meta-verse.They will want these avatars to accurately represent their style and personality,”she says,adding that beauty and fashion NFTs will play a role in this.The opportunity to try before you buy items such as cloth

311、ing or cos-metics will be a boon for NFTs.The technology could enable customers to virtually sample items they could then buy in the real world,alongside a digital copy to wear in the metaverse.Both would be linked by an NFT,which would help connect the online and offline versions.“This innovative s

312、olution intro-duces a new dimension of inter-activity and engagement in the NFT space by allowing consumers to not only buy the NFT but also sample and experience the product in an exciting new way,”Chang says.Building communitiesManaging assetsTrying before buying“Music has always been utilised and

313、 adopted by tech and new hardware,”says Miles Leonard,co-founder of TokenTraxx,a Web3 startup.“And music is once again at the heart of the explosion of Web3 and NFTs.”In the past,exclusive tracks or money-cant-buy merchandise were included for fan clubs.NFTs can be used in a similar way.For example,

314、fans who buy them could gain access to bands or artists backstage,drinks in a DJ booth or a personal writing camp with a songwriter.This bene-fits the fans,but also the artists.“Where NFTs have really shifted the paradigm in music is with emerging artists who arent receiv-ing a workable income throu

315、gh their streaming platforms,despite the thousands or millions of streams they receive,”Leonard says.This would help to address the long-standing challenge of making money from music,he explains,adding:“Through their NFT drops,artists are taking 80%of the value in their offering,not 10%.”Scalpers an

316、d the secondary ticket market represent a serious headache for many players in the live enter-tainment industry,taking a signifi-cant chunk of their potential profits for an event.To address the prob-lem,concert organisers have turned to technology.For example,smart-phone apps and ticketing are asso

317、-ciated with individuals,hampering the ability for tickets to be resold.But even this technology is fallible.NFTs could empower the industry to finally beat the touts.“Its plain to see how fraud could be negated.If all original tickets were to be recorded on a blockchain,that would effectively minim

318、ise the number of fakes on the market,”says Luke Jackson,senior associate at law firm Walker Morris,who mon-itors technology and digital innova-tion.“In turn,less reliance would be placed on third-party intermediar-ies to facilitate ticket resales.”Its possible to combine some of the tout-busting be

319、nefits with the other strengths of NFTs,such as the ability to build a community.“There are exciting possibilities for the artists or sports clubs hosting the events to engage with their fans,”Jackson says.“If every show has a corresponding ticket stub NFT,the event holders can reward those who atte

320、nd regularly and/or have supported them in the early days or through difficult times.”TicketingWeve all seen the huge bids for digital art,but,for those of us who are bored with Bored Ape and the like,where else could non-fungible tokens potentially have an application?How NFTs can be used beyond artChris Stokel-WalkerN O N-F U N G I B L E T O K E N SNThe most important potential future use of NFTs is to use it as a community tokenMusic12345