Emerging trends in Crypto

It is hard to imagine that the phenomenon of cryptocurrencies has passed you by, or that you have never heard of it. You may have read another article yesterday that Bitcoin has reached a new all-time high, or maybe your friends were bragging about being up over 200% on their favorite Altcoin now. But did you know that 960 blockchain companies are located in Switzerland, or that Switzerland was ranked fifth worldwide by the number of cryptocurrency ATMs, with the Top 6 operators running 129 cryptocurrency ATMs in the country?

It is fair to say that Switzerland has developed into a crypto hub by both fostering innovations and offering efficient regulations. Moreover, Switzerland has rapidly emerged as one of the leading countries in the global adoption of tokenized digital assets and blockchain technology, with an active community of blockchain and cryptocurrency asset ventures. The Swiss town Zug, which is called ‘Crypto Valley’, is characterized by a progressive regulatory and business environment, favorable taxation, and vast talent pool. Zug hosts a significant number of blockchain companies and projects, such as Ethereum, Cardano, Aave, or the exchange Bittrex.

In the field of cryptocurrencies and DeFi, however, the status quo is just temporary. Rapid changes force us to rethink, be agile, and catch trends as they emerge. In this article, we want to present five key trends that indicate a strong increase in interest from key stakeholders in the sector:

  • Growth of stablecoins & central bank digital currency (CBDC) projects: Stablecoins are digital tokens, secured by a fiat currency, which act as a hedging mechanism. They become more attractive to investors, as relative price stability protects the investors from high losses. In response to strengthening stablecoins, central banks around the world started their own stablecoin initiatives in a form of digital currencies. If issued, CBDCs may shift or even replace cryptocurrencies and disrupt the international payments market.
  • Mainstream interest across corporations: Financial institutions and large corporations across various industries started to invest and accept cryptocurrency payments. Broader institutional adoption makes access to cryptocurrency easier for ordinary consumers. UBS ranks 4th in the top-10 leading banks that have invested in crypto & blockchain companies, with an approximate funding of 266 million USD.
     
  • High usage of NFTs: Non-fungible tokens (NFTs) are digital assets, which are gaining popularity with an increase in sales, as they allow users to own an item in a digital world. As of September 2021, the total sales value of NFTs in the art industry alone amounted to around 774 Mn USD worldwide.
     
  • Increasing approval of ETFs: The launch of cryptocurrency exchange-traded funds (ETFs) experiences exponential growth, as the interest from investors grows. ETFs will allow investors to access a diversified portfolio of cryptocurrencies and trade in a more liquid and safer way. In September 2021, the Swiss regulatory authority FINMA approved the country's first fund, the Crypto Market Index Fund, which is restricted to qualified investors and exclusively invests in cryptocurrency assets. Additionally, the Swiss stock exchange (SIX) received regulatory approval from FINMA to launch a digital stock exchange, SIX Digital Exchange (SDX), clearing the way for cryptocurrency trading.
     
  • Adoption of digital assets via Decentralized Finance (DeFi): DeFi provides an open alternative for the current financial system by offering traditional services and products on a public decentralized blockchain network. Smart contracts that automate agreement terms between buyers and sellers or lenders and borrowers make these financial products possible. Regardless of the technology or platform used, DeFi systems are designed to remove intermediaries between transacting parties. The total amount of cryptocurrency held in DeFi projects worldwide accounts for 88.6 Bn USD as of September 2021, representing a 696% YoY-increase compared to September 2020.

As you can see, there is a lot going on in the cryptocurrency space and that behind the seemingly endless upward trend and increasing adoption rate of cryptocurrencies lie complex tax and regulatory issues that are becoming increasingly important, both for individuals and for investors. At BDO, we are committed to staying ahead of the curve in this fast-moving domain. For this reason, we have already partnered with ACCOINTING.com - a crypto tax tool with a portfolio tracking app - and are engaged in asset tracing, forensic investigations, and other crypto related services to successfully support your business.

Please do not hesitate to contact us at cryptoservices@bdo.ch if you want to know more about our services in the crypto field, or if you would like to learn more about this highly exciting topic in general or visit accointing.com.
 

Sources: BCG, Blockdata, Bloomberg, Crypto Valley VC TOP 50 REPORT H2/2020, FINMA, J.P. Morgan, Nonfungible.com, Reuters, World Economic Forum - Navigating Cryptocurrency Regulation: An Industry Perspective on the Insights and Tools Needed to Shape Balanced Crypto Regulation [2021].