We are well into the third month of 2022, and there is already so much happening on the crypto side of things that makes it difficult to keep up! In this article, I will attempt to make a few informed predictions regarding the future of crypto and the underlying tech in 2022. Let us first rehash a few significant events that occurred to date.
We ended 2021, still wondering about crypto-related legislation and the taxation impact in India. However, the Finance Bill, 2022, has attempted to make things more clear. According to the Budget released in February, India has finally recognized crypto and has decided to call it ‘virtual digital assets’, which is a general term meant to include crypto, NFTs, etc. However, the taxation treatment seems to be more in line with how the income-tax law treats income from lottery, gambling, or betting – applying a flat but high rate of tax. The only relief, in this case, is the cost of acquisition being allowed as a deduction. India has also declared its intention to come up with its own Central Bank Digital Currency (CBDC), which is meant to be on par with fiat currency.
Based on the ongoing trends, I am making the following predictions for the year 2022:
Central Bank Digital Currency (CDBC)
While wide-scale adoption of a crypto like Bitcoin seems to be some distance into the future, we will see an increasing number of countries releasing their own versions of digital currency regulated by their respective central banks. India has already announced its intention to do so. This would help make digital payments more transparent and also do away with the need of third-party institutions like banks to facilitate the transactions. Paying through CDBC also reduces the settlement risk faced by international traders.
If multiple countries release their own version of CBDC, it makes sense for them to do so on a blockchain that supports smart contracts. Smart contracts will become a norm in straightforward contracts such as indemnity contracts, loans, etc., where human intervention is minimal and the possibility of automation is high.
Increased adoption of blockchain
Governments around the world will soon discover more uses for a decentralized blockchain and immutable record-keeping. We will see increased applications of blockchain along these lines in areas like property records, e-invoices, logistics, etc.
Financial products consisting of crypto
Just like we have various financial instruments such as mutual funds, venture capital funds, portfolio management services, derivatives, etc., we could also have more asset classes arising out of crypto. Further, crypto would form an integral part of investment portfolios to further diversification. There already exist many examples of Bitcoin ETFs in the U.S., which might inspire other countries as well.
New class of audits
There already exist many technology-based assurance functions such as systems audits, data migration audits, SOX audits, etc. Added to this, we might need an increasing number of professionals to audit blockchains, smart contracts, etc., so that people are more likely to place their trust in using these new technologies.
NFTs may be taken more seriously
As an object of art, NFTs will gain popularity among music artists, sports clubs, celebrities, influencers, etc. The release of NFTs will go hand-in-hand with the release of brand merchandise, making it an integral part of marketing strategy. However, while NFTs are currently seen more as a piece of art that gives you bragging rights in the digital world, they do not have any real-world value. Lawmakers who are serious about using smart contracts and blockchain will start figuring out a way to tie the NFTs to real-world assets.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.