This report focuses on cryptocurrencies and includes comprehensive information and descriptions of their use, the mining process, wallets, and exchanges. There is detailed information on decentralised finance and non-fungible tokens, and an examination of issues affecting the sector such as regulation, central bank response and environmental concerns.
Cryptocurrencies, such as bitcoin or ethereum, are digital tokens and assets that rely on blockchain technology for secure transactions. Retail investment interest in cryptocurrencies has grown exponentially and prices remain highly volatile. Major cryptocurrencies such as bitcoin have achieved increasing levels of institutional acceptance and major global payments companies are putting strategies in place to integrate cryptocurrencies into traditional payments infrastructure. Asset managers have signalled an intention to add bitcoin to their funds. Investors are buying cryptocurrencies as short-term trading instruments and long-term hedges in their portfolios as an alternative asset class.
Dominant cryptocurrencies bitcoin and ethereum account for over 70% of the total cryptocurrency market cap, which is over US$2-trillion. Growth in cryptocurrencies has dwarfed all other asset classes in recent years. Five years ago, the market cap of all cryptocurrencies was below US$8bn. There is no reliable information available on the extent to which cryptocurrencies are used in payments. The top cryptocurrency exchange, Binance, records daily trade values of over US$16bn.
Regulators in different countries are not united or consistent in their approach to cryptocurrency. The decentralised, unregulated design of blockchain presents problems and trade-offs for regulators. It is difficult to track ownership of cryptocurrencies or trading amongst parties, unless there is an exchange of cryptocurrency for currency. The common theme is that governments seek to tax cryptocurrency profits and, due to the eventual need for market participants to exchange between cryptocurrencies and national currencies, exchanges have been the target of regulation and outright bans in many jurisdictions.
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Table of Contents[ Close ]
|2.||DESCRIPTION OF THE INDUSTRY||2|
|2.1.||Cryptocurrency as a Store of Value – The Digital Gold Case||2|
|2.2.||Cryptocurrency for Payments – The Utility Case||3|
|2.3.||Mining and Processing of Transactions||5|
|2.6.||Decentralised Finance (DeFi) - Blockchain Disruption||9|
|2.7.||Non-Fungible Tokens (NFTs) – Digital Art||11|
|3.||SIZE OF THE INDUSTRY||12|
|3.1.||Cryptocurrency Market Capitalisation||12|
|3.4.||Cryptocurrency Exchanges and Asset Managers||14|
|3.5.||DeFi and Smart Contracts||15|
|3.6.||Non-Fungible Tokens (NFTs)||15|
|4.||STATE OF THE INDUSTRY||16|
|5.1.||Response by Central Banks and Mistrust of Governments||21|