While 2020 has been a very difficult year, it has, ironically, been a catalyst year for fintech and crypto.
And there are no signs of the momentum slowing down in 2021!
Henri Arslanian is Global Crypto Leader, PwC and an Adjunct Professor, University of Hong Kong.
Here are my 10 crypto predictions for the coming year:
1. China leading the CBDC and future of money race
As we predicted last year, 2020 was a banner year for central bank digital currencies (CBDCs). With 80% of central banks active on CBDCs and the invisible pressure from Libra (now called Diem), which is expected to launch shortly, we should expect to see a lot of new developments in this space.
See also: Henri Arslanian discusses his predictions with Ben Schiller on the Opinionated podcast.
While wholesale CBDC developments are important, the focus of central banks will probably center on retail CBDCs, as that is the real game-changer. Unlike wholesale CBDCs that are just between a central bank and banks and that operate “behind the scenes” from the public’s perspective, retail CBDCs allow the public to hold a truly digital form of central bank money, something that does not exist today. Just as 2020 saw some countries from the Bahamas to the U.K. grab headlines with some of their retail CBDC initiatives, we should expect other G20 countries to announce their own plans.
But in practice, all eyes in 2021 will be on China as it continues to move forward with its digital renminbi (called DC/EP), blazing the trail when it comes to the future of money. In its last pilot phase, more than 2 billion RMB of value (US$300 million) were transacted via 4 million transactions using the digital RMB. The big question may be not if but how quickly China continues to move forward on this project.
2. Traditional financial institutions (and private banks) falling in love with bitcoin?
2020 was an incredible year when it came to the entry of institutional players in the crypto space. Not only did we see large institutions such as JPMorgan and Standard Chartered continue to build solutions for clients, many, from Citi to Deutsche Bank, even began regular coverage of the asset class.
We should expect this trend to accelerate in 2021 as many banks begin to make their crypto plans public. This should further catalyze the entry of traditional buy-side firms that are not only more comfortable trading with such regulated intermediaries but, in many cases, are obliged by their own regulatory or investor restrictions.
While investment banks have been the most active players so far, we should keep an eye on private banks. Most of the large private banks disregarded bitcoin as not a serious asset (not having crypto-related products to sell probably did not help!) but we should expect the forward-looking private banks to adapt and see crypto as a differentiator offering to engage and drive new revenue from the much-coveted high-net-worth and family office client base that is increasingly looking to buy…