Several big questions that connect crypto and the traditional monetary structures weighed heavily on the minds of policymakers, economists, and financial experts in the previous year are still just as important at the start of 2022. Chief among them is the process of monetary monopoly and how will governments, along with their new tool, the central bank digital currencies, try to keep a hold of it? From this problem, a range of other dreams takes flight as well, including the growing role of private companies and their currency rules.
These can, as examples of MicroStrategy or Tesla Motors show, connect both domains easily and have company holdings that consist of both crypto and fiat funds. Lastly, the digital currencies that are completely decentralized and free to act accordingly, like bitcoin, are also working hard on expanding their footprint on the modern world of finance. In 2022, these questions are still as relevant as they ever were and there is no sign that they will be resolved anytime soon. However, there is also little doubt that the wheels of digital money are turning faster and faster. The same coincides with a rise in the flow of the same money, as well as the intensification of the development of various systems that facilitate the same pipelines of funds.
Intensification of the Debate
As it was mentioned, it is hard to envision a future where all of these problems are magically taken care of in the next 12 months. But, at the same time, it is clear that the writing on the wall is drastically changing. It includes a process of debates that are intensifying and all of which in one way or another revolve around the issue of digital money. Here, it is China and its PBoC project that is generating the most interest, both in the mainstream media, but also inside of the regulatory circles. This year, China is starting up its DCEP or Digital Currency Electronic Payments.
These will officially begin working during the Winter Olympics. The games, along with DCEP will kick off in February. For that process, people who are not active in the esports domain or some other tech-oriented venture will get a chance to participate. Instead, it should be a widespread system that will be open to all types of individuals living and working in China today. In the US, stablecoin development is also kicking into high gear. All of this is making it next to impossible to ignore the development in these areas, which is in turn, intensifying the debate around all of these topics.
Similar to the debate in the mainstream media and the public arena, there is a lot of talk about the pathways of digital money in the regulatory circles as well. Many nations, including the global superpowers like China and the US, are actually trying to assess what should and can be done about regulating crypto and these novel ways of moving money back and forth across national borders, but with very limited oversight.
That is why in 2021, the US Senate had a debate focusing on the crypto provisions, as well as the futures-based BTC exchange-traded fund or EFT. China, on the other hand, did a lot to stem the flow of digital currency and practically (and finally) banned these on its territory. Now, it is trying to figure out a way for its digital yuan to get its rollout and do as little damage to other associated fields as possible. Other regulatory bodies will likely see just as much action in the coming months of 2022.
There is no way to discuss the pathways of digital money and not get into the ethereum 2.0 story. The gas fees for NFTs, most of which are built on ethereum token and the wider ecosystem, pressure on launching the ETH 2.0 is constantly growing. In 2021, many problems and issues of the current network setup became visible and even clearer than they were before. Also, some parallel blockchains like Beacon are already working using the proof-of-stake system. It uses the ETH setup but shows that the principles are sound.
But, the road to merging the Beacon to the mainnet is not going to be easy and possible issues are constantly creeping up. So, the challenges of finally pushing ETH 2.0 into the world will remain in place and will need some major undertakings to take place. Still, even with that, the digital money story is clearly harboring a big space for that much-awaited proof-of-stake system in the ethereum network.
The rise in the movement of digital money also comes with rising demand for power. This feeds back into the notion of cryptocurrency advancements in the form of proof-of-stake networks. These should, at least in theory, negate the need for the insanely power-hungry proof-of-work which is currently running the bitcoin network, but also almost all other blockchain systems as well. However, the escalating amount of energy that BTC and other tokens are consuming is also offering some possibilities. The climate change threat is pushing for more green and renewable sources.
These in turn are enforcing the industry that is slowly forming around them which is no longer just the producers of solar panels and wind turbines. Instead, a growing ecosystem will emerge that will continue to support these pathways of digital money even in the domain of electrical power and efficacy. That will offer the possibility of using things like government incentives for both decentralized and centralized systems, which will sometimes take the form of CBDCs that countries like China hand out. At the same time, even more, complex technical solutions will emerge to try and deal with the problem of power and money flow in the ongoing decade. So, even the purely energy-related side of the flow of digital money will see a big uptick in early 2022. Throughout all of this, the same flow is bound to continue to grow.