To many observers from the mainstream, the crypto crash pushed crypto back into obscurity. Although that may have been the case in 2017, this time is different and we are seeing massive regulatory and adoption momentum. For example, the chart below shows ownership in crypto-positive countries increasing.

One thing to note is that adoption comes from without and within. There are upstart companies being founded every day that are bringing cryptocurrency and the principles of decentralization to the mainstream, and then there are gigantic tech companies that are adopting the technology to their existing operations. Both are necessary for it to succeed.

Additionally, there are two types of adoption: business and consumer. Many businesses are implementing institutional-grade uses of distributed ledger technology and becoming more confident in the safety of the technology. At the same time, consumers are moving to crypto en masse because of the improved user experience and opportunities for monetization of their time. Business and consumer applications are both necessary for the mass adoption of crypto.

Governments Are Capitalizing on the Opportunity

Looking at the countries that took an early and positive stance on crypto, several traditional economies have done a great job of fomenting growth of crypto within their countries.

Germany has given a massive tax benefit to crypto by making gains on cryptocurrencies tax-free after one year of profit or for profits under 600 EUR. Switzerland is another frontrunner for crypto adoption, and has already had a municipality declare Bitcoin to be legal tender, with more expected to follow.

UAE and Singapore have created significant crypto investment and tax advantages for crypto, which is why so many are moving there right now. In the East, it appears as if Hong Kong has potential to be the dominant crypto hub based on the strength of adoption and government friendliness right now.

On the other hand, the “wait and see” approach some countries took has made companies very skittish. They worry about the possibility that regulations could change on the spot and leave them in a dangerous position.

Accelerating Development In the Last Quarter

The exciting part is that new methods of adoption are occurring every day. For example, in October it was announced that the Israeli government would be testing blockchain-based digital bonds. According to a release, tokenized bonds will be delivered to participants’ digital wallets, and the issue consideration will be transferred in digital currency from participants to the state of Israel’s wallet. The pilot project is scheduled to start in the coming days and should be finished by the end of the first quarter of 2023.

The UK government is also considering ways to use blockchain technology to reduce the bureaucracy of excessive paperwork within government. Nothing official besides plans to explore these ideas have been announced, but it is encouraging nonetheless.

South Korea has announced the 2024 rollout of a decentralized identification system. The ID will be available through a mobile application and have uses within finance, healthcare, taxes and transportation.

Twitter also recently announced an NFT preview feature that would show specific NFTs with a title and artist name when the links are posted on Twitter. Binance released news of their investment of $500 million into Elon Musk’s buyout of Twitter, which is a positive indication that crypto is going to be more involved in the mainstream tech economy going forward.

Facing Down Major Adoption Barriers

Regulations are uneven across the world, and lots of companies are reassessing where they are based depending on what countries they expect to be friendly to crypto over a long period of time.

More recently, the United States has gone more aggressively after privacy applications and is even said to be considering deeming Ether a security. In August, Tornado Cash, a virtual money-mixer, was sanctioned by the U.S. Treasury. Since then, there has been concern about whether Ethereum nodes that validate blocks containing Tornado Cash would also be sanctioned or blacklisted. All of this action puts crypto companies on edge, and may cause an exodus from the U.S.

China still has an all-out cryptocurrency ban in their countries, whereas Russia limits the spending of cryptocurrencies on goods from outside the country.

Perception is also an important aspect. More regulation is needed in order to legitimize the industry, which is why the recently proposed Lummis-Gillibrand bill is necessary. The bill has bipartisan support and aims to create a regulatory framework for digital assets that addresses CFTC and SEC jurisdiction, which will give cryptocurrency companies the security needed to build in the U.S.

In the same vein, Mark Zuckerberg’s shift to rename Facebook to Meta and push hard into the metaverse has so far been a losing proposition. When Q3 earnings were announced, they were down 52% from last year’s quarterly performance. A slump in ad revenue, combined with Meta’s Reality Labs unit losing $9.4 billion since 2022 began, is frustrating investors. It remains to be seen whether this will pay off, but until then, it is creating the public perception that metaverse and cryptocurrency plays are not paying off.

Luckily, other companies are faring better. With individuals spending an increasing amount of time online, Microsoft CEO Satya Nadella thinks that the metaverse is going to be a no-brainer way to reach consumers. Microsoft’s Mesh platform supports Teams and acts as Microsoft’s native metaverse. Users may have conversations, participate in virtual meetings, and collaborate on shared documents.

Both Old and New Technologies Are Now In the Mainstream

Extending blockchain use cases will be a major focal point for adoption. We’re now seeing some new crossovers occur that are very encouraging. Metaverse, DeFi, mining, and NFTs are all entering mainstream consciousness. For example, mining is going to be a major technology to keep an eye on as power grids look for ways to be more flexible.

Bitcoin and Ethereum have both demonstrated their product market fit, and are the most likely to maintain their longevity past being a purely speculative vehicle.

Bitcoin as a neutral currency is widely adopted in developing countries where the financial systems are either corrupted by legislation or heavily reliant on the USD.

Ethereum as a neutral financial layer has enabled TradFi giants like JP Morgan to trustlessly conduct forex transactions, eliminating counterparty risk by only having to verify the smart contract code, something that is characteristic of DeFi. Ethereum also has numerous non-financial use cases that have given rise to its positioning as the future “world computer”.

The number of Bitcoin addresses with a balance greater than 1 BTC continues to climb, as shown in the chart below:

And the price of Dogecoin recently rose 27% in one day, all because of the news of Elon Musk’s completed acquisition of Twitter. Investors think that Twitter could integrate a cryptocurrency and that Dogecoin is a contender. To many, this is unimportant “noise”, but it also shows how much awareness and anticipation of mainstream adoption has grown.

The main thing is that crypto ownership continues to expand, and there are countless companies who are finding new ways to bring crypto to business and consumer applications. Although a slowing economy may hinder this trend, the technological advancements and organizational efficiencies coming from distributed ledger technology are not disappearing.

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