Nudge Economics - as climate change receives increasing focus there is the potential for Digital Assets to play a greater role in rewarding citizens and organisations for changing their behaviour in an effort to reduce global carbon emissions. With the success of both Plastic Bank and SC Johnson (which paid people to collect plastic) we are likely to see more initiatives like these in 2021.

Greater institutional adoption of Digital Assets - much of the infrastructure required over the last few years is now in place: exchanges to trade Digital Assets, availability of custody services and banking facilities, the ability for regulated companies to purchase the required insurance and we are increasingly seeing greater legal clarity in many jurisdictions. In December 2020, Reuters reported the S&P Dow Jones would be launching a crypto index off the back of institutional demand for this asset class.

CBDC (Central Bank Digital Currencies) - the Chinese launched their CBDC in 2020 and expect to see other governments follow suit since cash is used less and less as payments increasingly turn digital. Whether we see Diem (formerly Libra)/Novi (formerly Calibra) become the global payment choice for billions of Facebook devotees or not remains a distinct possibility, much to the chagrin of central bankers.

Blockchains become scalable - one of the criticisms surrounding Blockchain technology is that it is not able to handle large volumes of data. 2021 could be the year when this is no longer the case. 

Stock market turbulence - are we to see equity markets stumble as we enter the eleventh year of a roaring bull market due to debt ridden, COVID-19 ravaged economies? As a comment from Charles Schwab recently pointed out, “..it has been 11 years since we've had an extended bear market, anyone under the age of 30 really hasn't lived through that.” As ever, market crash investors are likely to shun equites for a while and look at alternative investments, many of which will potentially be offered in a digital format.

Data democratisation - global bemouths such as Alibaba, Amazon, Facebook, Google and Tencent have monetised our personal browsing and spending data and, in doing so, have accumulated vast fortunes. Digital Assets offer the potential for the data we create by using  our cars, buildings etc to be monetised for us individually, and not to be used by global corporations. Expect to see more initiatives (such as UCL’s smart cities project) look at how technologies such as Artificial Intelligence and Blockchain technology are creating smart cities.

Omnipresent SEC - even though the ICO ‘brouhaha’ was in 2017/18, we are likely to see the US Security Exchange Commission (SEC) continue to pursue organisations it believes issued securities under the guise of an Initial Coin Offering (ICO). In June 2020, Telegram cancelled its ICO and returned $1.2 billion to its original investors as well as paying the SEC a $18million fine. Earlier in December the SEC was seen to be taking action against Ripple and some of its executives regarding its £1.3billion ICO, claiming it had not complied with security regulations. This is likely to stifle innovation in America and see the US’s leadership decline in the Digital Asset sector.  

Blockchain technology - more akin to an excel spread sheet on steroids, some argue that Blockchain technology needs a ‘killer application’. However, as 2021 unfolds we are likely to hear less about the technology around Blockchain but see more and more applications of how and where the technology is being applied.

DeFi v TradFi - in 2020 we have seen Decentralised Finance (DeFi) emerge, offering a digital on-line alternative to many of the financial services we have come to expect from incumbent Traditional Financial service firms (Trad Fi). DeFi ‘kicked off’ 2020 with $700million of value in its various protocols and ended with over $16 billion. DeFi is set to continue growing as the Fin Tech ‘wanabees’ pose a both real challenge to and take market share from traditional banks and asset managers.