As the world’s economic, political, and social elite gather in Davos Switzerland for the annual World Economic Forum meeting, the landscape for crypto continues to look murky. To put it mildly, crypto and crypto advocates have had a tumultuous last 12-18 months, with crypto reaching all-time highs, new products and services launching, and increased mainstream awareness of the ecosystem at large. On top of these bigger picture trends, the rapid pivot of institutions into blockchain and cryptoasset applications have led to renewed optimism associated with mainstream adoption. This is not even touching on the momentous approval of multiple spot bitcoin ETFs to start trading in the U.S.
On the other hand, cryptoassets as an asset class and outside of the institutional setting, are still recovering for what can best described as a brutal year for the reputation and trust of the sector. From billions lost in scams, the collapse of FTX and guilty verdict of Samuel Bankman-Fried, as well as billion-dollar fines levied against Binance, investors are right to have trust and confidence issues in the space. It is even reasonable to state, that given the multitude of faults that have occurred in the sector that crypto needs to renew the trust, transparency, and confidence that investors and advocates once put forward as leading reasons for adoption.
The theme of Davos 2024 is rebuilding trust, so let’s take a look at how the crypto industry can continue to do just that.
Make The Most Of ETF Momentum
After years of advocacy from the crypto space, and stonewalling by the SEC, the recent announcement that all 11 of the recently submitted ETF applications were approved for trading in U.S. markets is certainly news worth celebrating. Setting aside the disappointment of some of the more ardent bitcoin-only advocates, who forecasted dramatic increases in price from the first day of trading, this action cements bitcoin as an institutionally recognized asset class. As tempting as it might be to take a pause and reflect on this progress, the reality is that this progress is only the first step of many.
BitcoinBTC 0.0%, and cryptoassets more broadly, are still dogged by statements decrying the fraud and lack of trust in the space. This includes statements by SEC chairperson Gary Gensler in the lead up to the launch of the ETF products, and are indicative of the issues that the sector still faces. For crypto advocates and supporters now is not the time to push for higher prices, to celebrate “to the moon,” discussions, or any other activity that could construed as overly reckless or speculative.
Rather, and building on some of the efforts supported by Coinbase and others, efforts should focus on improving relationship with regulators, building products that have a sustainable use case, and educating the wider investor community.
Focus On Clear And Transparent Reporting
Building on the first point arguably the most important area that crypto firms, investors, and advocates should focus on is improving both the quality and quantity of reporting for crypto organizations. With 75% of Americans having low or no trust in cryptoassets, this is an issue that must be addressed if more widespread adoption of cryptoassets will occur. Pointedly, some of the failures that unfortunately made crypto a topic of everyday and household conversation – namely FTX – were exacerbated by a breakdown in the reporting of data and the audits of financial data that were reported.
This is not to say that reporting in and of itself will address any of the underlying issues that continue to exist in the cryptoasset space; fraudsters and poorly run organizations will always exist in any industry. Rather, and this is a point that seems to be coming more to the forefront for advocates and investors alike, crypto projects and organizations need to emphasize transparency in every step of the project.
Transparency can take the form of financial statement audits, more clarity around reserve assets, or more information being provided around the management team of the project in question. Regardless of the specific interpretation, however, transparency and communication are imperative for crypto in 2024.
Continue Educating The Marketplace
One of the largest, if not the single largest, issues that continues to trip up both the rule-making process and the sentiment of investors at large, is the information asymmetry that continues to exist in the marketplace. For investors and developers that have been involved in crypto for years the array of terminology and jargon can seem second-hand, but for more recent entrants to the space or other non-experts the terminology can resemble an incomprehensible word salad.
Hot wallets, multi-signature authorization, hashing, mining, staking, decentralized exchanges, non-fungible tokens, Layer 2 applications and other terminology cannot only make crypto seem confusing to investors, but creates gaps in understanding that unethical actors can take advantage of. Educating policymakers is only part of this conversation, albeit an important one, but the educational efforts from the sector must go beyond just discussions with regulators. Crypto applications need better user experiences, and these applications must be understandable and useable by a wide range of users, not just crypto natives.
2024 is setting up to be a pivotal year for cryptoassets, and the organizations in the space. Building on the theme of Davos 2024 – rebuilding trust – crypto advocates can do a lot to move the sector forward.
Source : Forbes / Jan 15, 2024