It has been a rough few years for cryptocurrencies and the digital asset market as a whole. After coins managed to peak in November 2021, prices started tumbling at accelerating rates. One after the other, some coins saw their demise, losing up to 100 percent of their values within one day.
By the end of 2022, the global crypto market lost $2 trillion in market value. During the same time, a survey found that more than 60% of American adults believed that investing in digital currencies is extremely risky – a strong jump from 45% in 2021.
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The once-red hot, and seemingly alluring digital asset market, considered to become the dot com boom of the twenty-first century has matched investors and traders with a sorry sign of performance and cast a deep blanket of bearish sentiment over the market.
Painstakingly low crypto prices aren’t the only weight that’s been tugging on the digital market.
The collapse of several crypto and decentralized exchanges, more so FTX Exchange, once the world’s third-largest exchange and a leading institutional investor in crypto and blockchain businesses was another blow for many.
By November last year, FTX filed for bankruptcy, and the company which was once valued at $32 billion and had more than $8 billion of liabilities was struggling to pay one million creditors.
Perhaps it’s worth saying that FTX wasn’t the only well-known crypto business that has gone under in recent times. The cryptocurrency lender, Genesis, recently filed for bankruptcy on January 20, 2023. The company owed creditors more than $3.4 billion after the crash of the crypto market following the events by the FTX news.
It’s been a hard and compelling time for crypto traders and investors. Although, recent events have only further highlighted the need for better regulation and standardization of the entire decentralized market
The heated conversation on regulation has been a strong talking point in many government offices in recent years. Following recent events, and several economic headwinds caused by cryptocurrencies and digital assets, the United States Congress and the Securities and Exchange Commission (SEC) are now throwing their weight behind efforts to regulate the crypto and digital assets market.
Many have shared their skepticism, and for good reason. High price volatility, the growing number of security risks, crypto-related scams, and its ecological impact, among other things, are holding some contenders at bay, leaving them wondering how long the allurer of crypto will remain.
A Once Prosperous Opportunity
While crypto and blockchain technology enjoys mainstream adoption, and policymakers look to succumb to its nuanced prowess in the global economy, it remains unknown how well crypto and other digital assets will help transform the digital economy in the future.
And it’s not only crypto alone that could completely change the way we exchange and transact with one another.
In an era where consumers and governments are demanding more climate-conscious actions, and corporations are casting sustainable practices, to some extent at least, blockchain technology and Web 3.0 software could become the regenerative answer.
Crypto in the scope of blockchain technology and Web 3.0 software capabilities could potentially mobilize capital that can fund several projects and research currently supported by private shareholders and government entities.
Perhaps the more striking interest here falls on the back of decentralized Web 3.0 software and blockchain software. With the technology already at our disposal, and already present in the digital economy; Web 3.0 could use local actors, community research, and knowledge to coordinate resources in the avenues that require regenerative expansion.
Another bucket that could potentially see further growth is the use of tokens and non-fungible tokens (NFT) to establish a decentralized carbon trading system. Having more transparency could minimize abuse and could tokenize carbon credits. These tokens can become available on a public ledger, further encouraging responsible offsetting strategies.
The bountiful basket of opportunities poised by crypto, blockchain, and Web 3.0 together, would help develop a new frontier of economic activity and digital exchange.
When there is a crypto bear market or winter, such as what we’ve seen in the last few months, then it becomes increasingly difficult to direct innovation into the streams that require them the most.
A company representative from Mooning, a global performance marketing, and Web3 agency, said the persona of crypto, blockchain, and Web 3.0 technology is not accurately reflected in our current applications.
“There is an underlying caricature that has become too well-known in the current state of the economic, social, and environmental crisis plaguing the industry. We already have a dynamic set of technologies that could help build projects, direct operating infrastructure, and deliver actionable real-world results.”
Crypto Crime Is Skyrocketing
Some argue that although crypto and blockchain technology can provide potential real-world solutions to economic democratization, it remains an unstable monetary option to resolve problems within the digital economy.
Its volatility decreases its use as a stable store of value, and constant price fluctuations make it an even more unstable medium of exchange.
They are clouded in secrecy, and although this is perhaps a key selling point to crypto traders, it continues to be a channel for illegal activity.
Following the pandemic, which saw a mass transition to online work and digital transactions through eCommerce and fintech platforms, crypto and cyber-related crime has hit an all-time high.
A Chainanalysis report found that the value illicit addresses receive in crypto transactions rose from $7.8 billion in 2020 to more than $14 billion in 2021.
What’s more, crypto scams jumped by 82% in 2021, leading to more than $7.8 billion worth of crypto being stolen from innocent victims.
Anti-Trust And Money Laundering Problems
This is perhaps only the tip of an every-crumbling iceberg.
The same Chainanalysis report showed that cryptocurrency theft grew the most, jumping by more than 516% between 2020 and 2021. In total, roughly $3.2 billion worth of crypto was stolen from digital wallets by illicit and malicious actors.
Following a tumultuous couple of years, a Reuters report found that the illicit use of cryptocurrencies topped more than $20 billion by the end of 2022.
Following the outbreak of geopolitical tension between Russia, Ukraine, and the West, sanctioned countries, largely those directly involved in the conflict, have started using cryptocurrencies to fund their war-related activities and invasion.
Last year saw the biggest jump in transactions associated with sanctioned entities, including both government and private institutions. In total, transactions increased 100,000-fold and made up 44% of the total illicit activity recorded in 2022.
Crypto kiosks and peer-to-peer (P2P) payments are also helping to fund the global drug and human trafficking industry.
This is not however a common occurrence in developing nations, and is prevalent in most countries, regardless of economic and social development.
In Europe, several large-scale laundering activities using cryptocurrencies and involving EU law enforcement authorities have made an appearance in recent years.
Virtual currency ATMs have been the target for laundering criminals, using these stand-alone machines to buy, sell and exchange virtual currencies for laundering purposes such as drug trafficking proceeds.
Elsewhere in the world, some reports have found 15 to 27 online commercial sex marketplaces that were accepting virtual currencies as payment.
While crypto remains an opportunistic monetary solution for the digital economy of the future, it remains shrouded in secrecy and conspiracy.
Environmental Concerns
As we start to chip away at the dark underside of the crypto and blockchain market, we start realizing that the effect digital assets have on society is simply the plume of an ongoing wildfire.
Now, with the iteration of new internet and software developments, crypto meets at the intersection between blockchain technology and Web 3.0 capabilities, a new economic paradigm that could harness the power of native tools for more democratized access to the global economy.
However, in a time where new-age technology such as crypto mining emits three times more carbon dioxide than the largest U.S. coal power plant, cleaner and more advanced economic alternatives could adequately distribute investment dollars, investor sentiment, and government legislation, helping to even out the playing field.
With global attention focused on several technological innovations, including Web 3.0, regenerative finance or ReFi could be a new way of taking into account the negative externalities caused by the crypto and blockchain industry.
And some experts are hopeful that ReFi can be more than an environmental movement, looking to use it as a tool to address social inequality and widespread financial instability.
Regenerative finance has been around since the 2008 financial crisis. Yet, it was only in 2015, after a paper titled Regenerative Capitalism, by economist and philosopher, John Fullerton that the movement started seeing more widespread attention from different pockets of the economy.
Fullerton however described regenerative economics as the theoretical design that enables communities to utilize current resources to restore and regenerate what has been lost. Through these efforts, economies, including different segments of the global economy, could further conserve what remains, while ensuring long-term financial prosperity.
At its core, regenerative finance would require markets to fix the issues those same markets have created.
At the time of Fullerton’s paper, cryptocurrencies, and blockchain technology were still riding in the backseat, and Web 3.0 was still but a pipeline dream.
In September 2022, The White House Office of Science and Technology Policy (OSTP) published a report on the Climate and Energy Implications of Crypto-Assets in the United States. This outlines the fundamental efforts of the Biden administration to address climate actions and invest in more sustainable financial innovation.
A Work In Progress
Although there have been real-world applications of crypto, there’s still a lot of work to be done before we’ll be able to see the wider and broader implementation of crypto-based systems and digital assets.
For starters, existing businesses would need to adopt a more dynamic infrastructure that can help support crypto transactions. This would require ample investment over the short and long term from business leaders, shareholders, and consumers.
Second, there needs to be a global shift in the way companies operate in terms of product and service delivery to consumers. There would need to be better and more intuitive policies required to see a wide-scale application that can be monitored and tracked over time.
With this in mind, there’s also the challenge of consumer understanding and how crypto will make an impact on their lives, communities, and the ecological environment.
In many ways, it would also require supply chains to update their operations, looking to take on more digital efforts in the short term that could potentially flow over to long-term goals.
In the real world, these systematic changes require proper investment dollars, and a lot of critical analysis to better understand where funds will need to be directed to improve to bring crypto and blockchain from paper to practice.
While there are companies across different corporate levels and industries already adapting new crypto and blockchain practices in the hopes of getting a headstart, the remaining businesses outside of this sphere are still only making digital gestures, without little to no action.
There’s perhaps a burden to the concept or idea behind crypto and that would mean that investors will need to take a bigger part in understanding how their money is being used, and also how their investment decisions will make a broader impact.
It is possible that in the coming years, we could see more widespread acceptance, but this comes at the cost of the consumers, the buyer, and the business owner as well. These efforts are not a single company or person’s liability and require every link within the supply or production chain to make systematic changes.
The Fading Allure
While we may have the crypto and blockchain technology at our disposal, we’re perhaps still a long way from clearly understanding the future impact it will have on our communities and the global economy.
Although the concept of crypto has gone mainstream in more recent years and presents new opportunities for investors, traders, and consumers, there’s still a lot we don’t know about the long-term usability thereof.
A shared attitude of skepticism, volatile price fluctuations, and plagued with illicit activities, have only further made it harder for consumers and businesses to fully embrace cryptocurrencies.
For what it's worth in weight, crypto can present itself as a possible economic solution. Yet, these solutions remain gestures that will still need to see real-world testing and application before they can take up their place within the greater digital economy.
Considering these factors, and where it may lead in the coming years, we’re still not certain how stable crypto will be in the long run. Better yet, many still share the uncertainty of whether crypto remains a viable monetary investment option, or an endless pit wherein investment dollars are thrown and never encountered again.
While it’s a hopeful alternative, and although there has been some momentum over the last few years, it’s perhaps a trend that has come with a lot of excitement, but could steadily lose its potential as a regenerative solution if there’s no real application or use for its systems within the current economic climate.
