The year 2020 was like no other, and as this year comes to an end, it is important that we all take stock of where we are and try to get a better handle on where we might be going. Setting aside the health, societal and economic effects of the COVID-19 pandemic — difficult as that may be — there was quite a bit of activity and development in the blockchain and cryptoasset sectors that is worth noting.
Let’s take a look at several of the big-picture trends and directions that CPAs should be keeping an eye on as the calendar flips to 2021:
Stablecoins are the new bitcoin. Even as bitcoin fluctuates and trades above its previous all-time high set in 2017, the stablecoin sector of the cryptocurrency space continues to grow and accelerate. In addition to being worth tens of billions of dollars on its own, stablecoins are also at the center of the very same efforts that drive headlines at organizations like Visa. It could be argued that stablecoins are now the driving force behind further investment and development versus simply watching bitcoin prices.
This is not even touching on the rise of central bank digital currencies (CBDC) under development across the globe and, in some cases, already in the marketplace. Not only are cryptocurrencies evolving, but so are the players involved.
Institutions are driving the trends. Cryptocurrencies may have originated as a method by which individuals could access a financial payments infrastructure and as part of a system that was disconnected from incumbent players, but that narrative has turned around completely. At the end of 2020, the institutions that have launched blockchain and/or crypto projects include J.P. Morgan, PayPal, Visa, Mastercard, BlackRock and Fidelity. It is still too early to tell what the influence of these large incumbents will be, but it certainly has increased the attention of investors and regulators.
Although not exactly capturing the idealized vision of early bitcoin developers, large institutions — with the people and capital brought to the conversation — are going to play a critical role moving forward.
Regulation is catching up. Dozens of blockchain- and cryptoasset-related bills were put forward for debate in 2020. While none were passed, this increased focus — on top of actions by regulators such as the SEC and IRS — seems to indicate that regulations are on the way. These are not normally greeted with cheers, but to continue encouraging wider adoption and utilization it seems reasonable that more clear-cut rules will be necessary.
In December, the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act was introduced for debate in Congress, which, according to some market participants, could lead to unnecessary costs, complexity and obstacles to further development. Regardless of the specific legislation or individuals involved, regulation and compliance are playing an increasingly larger role in these sectors.
As the calendar flips to 2021, be sure to join and remain engaged with the NJCPA Emerging Technologies Interest Group and subscribe to the NJCPA Tech Talk Podcast to keep up to date on everything technology related.