EY’s Paul Brody says crypto regulations will halt scams and incompetence. Law enforcement, consistency, and blockchain product leadership are positive tendencies. Blockchain’s non-financial uses and industrial adoption signal the end of Crypto Winter and the rise of regulated crypto companies.
According to Paul Brody of EY, soon-to-be-implemented U.S. rules will put an end to the scams, schemes, and negligent investment management practices that caused the present market decline. Are your skis ready? If not, clip in and try to have fun, as this will be the final crypto winter we have. Depending on how you count, we’ve had two or three, and this one has undoubtedly been the worst and most annoying. Fortunately, it’s going to be the last one, and here’s why: Blockchain and cryptocurrency are about to transition into regular, regulated enterprises. I see three significant positive trends for the future, despite the fact that it is always very challenging to distinguish signals from noise.
Increased use of force by law enforcement
Starry-eyed do-gooders (of which I am one) and unscrupulous opportunists trying to use that message to sell whatever they have created have always had a tense relationship in the realm of cryptocurrency and blockchain. The failure of some crypto and blockchain assets to live up to the warnings we and others have issued about their risky, speculative, and outright ludicrous nature has been one of the things that has been most irritating over the years. Initial coin offers (ICO) have a terrible track record, and we (EY) warned about it in 2018 and again in 2019, and we weren’t the only ones to voice our worries. Warnings and social media flame battles are significantly less successful than enforcement actions.
Public policies that be inconsistent and contradictory
Many nations, most notably the United States, have intricate and dispersed regulatory frameworks. If the blockchain community can’t agree on policies, regulators shouldn’t be surprised. It helps that the legal system must explain how the law is applied consistently. Regulators must interpret the law consistently in those cases.It will take some time for this clarity to become apparent, but it will.
Developing product and industry leadership
Tech companies experience the boom-and-bust cycle when expectations exceed profits. Personal computers and game consoles were released prematurely in the 1980s. In the late 1990s, network technology and the internet slowed revenue growth. Like the dot-com bubble, many blockchain/cryptocurrency companies went public without clear business strategies or revenue streams.
Unrealistic forecasts drove investment and value growth throughout the dot-com bubble and crisis. Online commerce totaled $105 billion in 2005, despite estimates of $4-6 trillion. As a result, several well-supported enterprises collapsed, market valuations dropped, and technology market capitalization declined by $1.75 trillion in 2000, more than the estimated blockchain ecosystem market value in 2023.
Then the plot twists: E-commerce and online business are everything promised in 1999. 2022 e-commerce spending will reach $5 trillion. USA reached $1 trillion in 2022. Top 10 IT businesses are $7 trillion. U.S. tech stocks exceed banking and energy stocks. Despite fluctuations, no technological bust has occurred since 2000. Sales and profit growth increasingly drive the tech industry.
Blockchain and cryptocurrency companies are emerging. Though early, non-fungible tokens (NFT) appear to have established a long-term presence in user and business ecosystems as collectibles, digital awards, tickets, and proofs of attendance. Anyone can sell NFTs. My monthly self-NFT? Get it. As industrial enterprises adopt blockchain for non-financial engineering use cases, EY is increasing “boring” areas like supply chain management, product traceability, and emissions tracking. Privacy technology—not anonymity—has been essential for organizations using shared, public technical infrastructure without disclosing sensitive business information.
Blockchain will flourish after crypto winter. Prisons hold criminals. Emerging rules. Most importantly, ecosystem businesses are developing products and earning valuations. Blockchain and cryptocurrencies can become mainstream enterprises with regulated outputs. We’ll experience normal ups and downs. Enjoy crypto-winter. Your last.