*By Sheila Warren and Sumedha Deshmukh<\/p>\n
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This year has been off to a notable start for crypto and blockchain. On Jan. 7 the total cryptocurrency market hit an all-time high exceeding $1 trillion for the first time. Renewed interest in, and conversations around, blockchain technology and digital currencies from industry and government leaders have accompanied the rise.<\/p>\n
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At the same time, the challenges of 2020 continue, including the global pandemic. COVID-19 dominated the recent\u00a0Davos agenda<\/a>, with the need for digital solutions and real-time multi-party access to consistent information highlighted across multiple sectors.<\/p>\n <\/p>\n At the World Economic Forum, we will continue to work with hundreds of experts from governments, business, civil society and academia to bring together the\u00a0seemingly disparate worlds<\/a>\u00a0of crypto and long-standing institutions.<\/p>\n <\/p>\n Identity<\/strong><\/p>\n All eyes are on digital identity for COVID-related needs \u2013 but long-term strategies and implications remain to be seen.<\/p>\n <\/p>\n The COVID-19 crisis has increased consumer demand for identity solutions that don\u2019t compromise individual privacy and freedoms. Of course, ideas of what constitutes the ideal level of privacy preservation vary widely around the world, with China and the U.S. taking deeply divergent perspectives. As the travel industry and various governments continue to explore ideas like \u201cimmunity passports,\u201d which would maintain vaccination and\/or testing records, the creation of a global standard around digital credentialing seems both necessary and elusive.<\/p>\n <\/p>\n In addition, what does it mean to anchor on digital identity as a reaction to a very specific set of circumstances (namely an unprecedented global pandemic)? Digital identity systems are relevant for everything from\u00a0financial services<\/a>\u00a0to\u00a0re-skilling workforces<\/a>, which each have distinct requirements. Focusing on one sector without taking a longer-term view can mean that we lose out on opportunities, duplicate efforts and create more complicated user experiences.<\/p>\n <\/p>\n As it stands, there are very few regulations or industry standards to prevent fragmentation of technical solutions, protect privacy or promote inclusivity, interoperability and portability \u2013 all essential principles \u2013 for digital credentialing beyond time-sensitive use cases. As global society struggles to return to \u201cnormal,\u201d there is a need to ensure potential solutions that embrace the use of digital credentials, leverage the experience of the digital identity community, consider a longer-term and holistic view, and create strong partnerships with public authorities.<\/p>\n <\/p>\n Institutional adoptio<\/strong>n<\/strong><\/p>\n Last year was the year of \u201cinstitutional investment\u201d in\u00a0bitcoin<\/a>\u00a0\u2013 a buzzy phrase that was seen across pundit analyses of the crypto rallies, referring to large-scale investments of players such as\u00a0MassMutual<\/a>\u00a0and\u00a0Square<\/a>\u00a0(SQ). It is likely that financial institutions and service providers will intensify their own experiments with, and use of, cryptocurrency this year, whether via investment or actual deployment.<\/p>\n <\/p>\n In some instances, they are also being used for improving internal processes. For example, in a\u00a0Davos agenda panel<\/a>\u00a0Hikmet Ersek, CEO of Western Union, cited the company\u2019s use of a stable \u201cWU Coin\u201d to exchange different currencies, done \u201c21 times every second.\u201d<\/p>\n <\/p>\n COVID-19 also raised the profile of the conversation around central bank digital currencies\u2019\u00a0exploration<\/a>\u00a0of blockchain technology. We saw the launch of some of the first national-level blockchain-based systems, including in the\u00a0Bahamas<\/a>\u00a0and\u00a0Cambodia<\/a>. At the same time, progress around China\u2019s DCEP (Digital Currency\/Electronic Payment) continued in the background, with the People\u2019s Bank of China having\u00a0completed pilots<\/a>\u00a0in Shenzhen, Xiong\u2019an and Suzhou, processing RMB 1.1 billion across 3.1 million transactions.<\/p>\n <\/p>\n Still, many governments and central banks, including the U.S. Federal Reserve and European Central Bank,\u00a0continue to research<\/a>\u00a0whether central bank digital currencies (CBDC) hold potential but have maintained they do not see value in issuing one at this time. Many are also watching the growth in the stablecoin space \u2013 with total value now surpassing $25 billion \u2013 fueled by decentralized finance (DeFi) and institutional interest. This has corresponded with increased attention from regulators, for instance the controversial\u00a0STABLE Act<\/a>\u00a0in the U.S. and the recent\u00a0letter<\/a>\u00a0from the Office of the Comptroller of the Currency. We can expect continued regulatory interest and activity in this area from around the world.<\/p>\n <\/p>\n NFTs boost inclusive wealth<\/strong><\/p>\n We have come a\u00a0long way since CryptoKitties<\/a>, yet relatively little progress has been made in realizing the potential of non-fungible tokens (a cryptocurrency token that is indivisible and unique) outside of the gaming context.<\/p>\n <\/p>\n But we are already seeing shifts around the dialogue of inclusion. Previously, there was talk of democratizing access to high-value assets, such as art. While there still might be potential here, it\u2019s important to consider the implications for creators as well. For instance,\u00a0some<\/a>\u00a0have spotlighted black artists and the role that\u00a0crypto art<\/a>\u00a0can play in allowing for greater ownership and wealth creation within the space, as well as\u00a0art exchanges<\/a>. We\u2019ve also seen early signs of how this may translate to\u00a0music<\/a>\u00a0or writing.<\/p>\n <\/p>\n *About the authors: Sheila Warren is <\/em>Head of Blockchain and Data Policy<\/em> and<\/em> Member of the Executive Committee, World Economic Forum<\/em>; <\/em>Sumedha Deshmukh<\/em> is <\/em>Platform Curator, Blockchain and Digital Currency, World Economic Forum<\/em><\/p>\n