Davos 2023: World Economic Forum says cryptos will go mainstream despite ‘difficult’ 2022

Cryptocurrency trading: Despite a terrible run in the year 2022, the World Economic Forum (WEF) has said that cryptocurrencies will continue to be an integral part of the “modern economic toolkit”. In a blog post on January 2, 2023, the international non-governmental organisation said that the year 2022 not just saw people losing more than $2 trillion in cases like FTX collapse and death of the Terra blockchain, but the year also saw millions of diehard crypto utopians (and some crypto-anarchists) losing their fundamental trust in the whole blockchain process.  

Cryptocurrencies have enjoyed a remarkable run, from their state of unknown to a trillion-dollar valuation in just over a decade. The forum, however, termed the waning trust in the system as the most damaging trend for the nascent industry and blockchain technology, which was set up with the hope to correct the misdeeds that gave rise to the 2008 financial crisis.  

The blog post also delved deep into the recent crash of the crypto market after the demise of the Terra blockchain, and the recent downfall of FTX. “The market downturn can be equated to the dot-com bubble, where most companies were wiped out with formidable entities standing out,” wrote Dante Disparte in the blogpost, who is WEF’s chief strategy officer and head, global policy, circle internet financial. 

He added that while policymakers (central banks in different countries) have been raising alerts regarding crypto trading, the multiple failures have left them wondering about the future. The global body slammed regulators for not acting decisively to prevent the 2022 meltdowns that caused the crypto winter.  

“Policymakers who have been sounding an alarm about cryptos’ excessive risks, while failing to create sensible regulations, have been vindicated by not one, but multiple large-scale failures,” Disparte said in his post. 

Comparing the crypto winter of 2022 with the dot-com bubble crash, the global economic forum said that crypto’s bear market helped root out speculation and placed the industry on a sure footing with established institutional players. 

Also read: Next financial crisis will come from private cryptocurrencies: RBI Governor Shaktikanta Das

The global body, which is known to be a supporter of central bank digital currency (CBDC), said that the involvement of traditional banks like JPMorgan with crypto will mature the asset class into “responsible, always-on internet finance”. 

Crypto’s future as of now 

The WEF has clearly said that the future of cryptocurrencies will be guided by the regulatory outlook and has stressed the role of blockchain technology in the general financial sector.  

In the blog post, the global body stated that the underlying technology of cryptography and blockchain has widespread applications. It stressed that experimentation in the financial services sector is something to note. 

“The countries that enable responsible competition will shape the future. Cryptography and blockchains will continue to be integral parts of the modern economic toolkit, despite the great harm these tools may have caused when wielded by the wrong people,” the blog post stated. 

Also read: NFT mania is dying, but global fashion brands are still minting millions from tokens; here's why

The blog concluded that there is a need to reduce the risks of crypto by placing blockchain technology in the hands of ‘responsible actors’ and encouraging its responsible use. 

“History is riddled with examples of otherwise good or neutral technologies being co-opted by bad actors and those ever-present human follies of greed, nescience, risks of opportunity or outright criminality. All of these are amplified in emerging, lightly regulated sectors and accelerated by technology. Indeed, no sector is risk-free, especially not one involving money. However, crypto punishes the errant at speed, giving bad actors few places to hide,” Disparte said in his post.