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At the end of January 2021, the Ripple team presented a large-scale vision for the development of the crypto industry this year in their blog. The company’s analysts still believe that the main problem of cryptocurrencies is legislative uncertainty in many countries of the world.
The forecast of one of the leaders in the field of digital finance, who has established close cooperation with the largest transnational banks, will certainly be of interest to many – from ordinary owners of cryptocurrencies to institutional investors and successful financiers. And we have selected for you the most significant findings from the Ripple report.
Two key trends for 2021
Ripple analysts identify two most important areas for the development of the blockchain industry this year: DeFi and CBDC. We invite you to familiarize yourself with how they assess the prospects for progress in these areas over the coming 12 months.
The rapid development of the DeFi market in the last year has brought the traditional financial sector and the cryptocurrency industry even closer. New fintech startups are rapidly launching developments aimed at the following changes in the world of financial services:
- expanding the traditional list with alternatives;
- improving the quality of services;
- wide accessibility to the public.
Decentralized finance also allows many cryptocurrency holders to become direct participants in the financial market and receive high returns on their investments.
Ripple believes that active growth and development of the DeFi sector will continue in 2021. The number of new clients wishing to receive financial services without intermediaries will grow several times. Michael Zochowski, who is responsible for the DeFi direction at the company, announces the following expectations in this area:
- many startups created in 2020 will be merged or absorbed by stronger players in the coming months;
- the most unique projects will significantly increase the user base;
- solutions in the field of interaction between smart contracts and computer networks will be the most in demand.
Ripple analysts emphasize that it is time for DeFi application developers to focus on creating simple and effective solutions that will help users access the widest possible range of financial services. At the same time, it is important to ensure the security and protection of confidential data from external threats.
The second most notable trend in cryptocurrencies remains the development of Central Bank Digital Currencies (CBDCs). The company believes that transparent and understandable legislation will finally be adopted at the global level in 2021. It will make it possible to intensify the work of state regulators to issue their own stablecoins around the world.
According to James Wallis, Ripple’s VP of Central Banking, 2021 is expected to see significant growth in private blockchains, stablecoins, and CBDCs. This will enable any company to take its rightful place in the industry of payments and finance.
Some of the largest banks in the world have already demonstrated understanding of the prospects for CBDCs and interest in issuing them. So, on January 21 of this year, it became known that Sberbank of Russia had filed an application for registration and issuance of the Sbercoin stablecoin. It is planned that it will be pegged to the ruble. If this plan is approved by the Central Bank of Russia, in the spring of 2021, we can expect the launch of a blockchain platform and an electronic wallet for Sbercoin.
According to the roadmap of the Bank for International Settlements, in 2021 it is planned to conduct a large-scale series of tests of national cryptocurrencies in several countries of the world: Singapore, Switzerland, Hong Kong and some others.
Even at the World Economic Forum in Davos, it is planned to allocate two days for a separate session on the topic “Resetting Digital Currencies”. The leitmotif of the discussion will be the decline in the role of cash and the prospects for the development of CBDC in the modern world. During the session, experts from the financial and cryptocurrency areas will discuss the following topics:
- already existing opportunities of digital money;
- options for interaction within the framework of global cooperation for the management and regulation of crypto assets.
Why CBDC and DeFi?
Such a choice of key areas for the cryptosphere in 2021 is quite logical and understandable. Indeed, the DeFi sector’s all-time boom over the past year has led to an influx of colossal amounts of funds into it. So, in January 2020, the amount of funds blocked in various DeFi protocols was about $700 million. And by the end of the year, it had already reached an impressive $15 billion. In other words, the growth was 2,100% – and this is less than a year. No sector of the world economy can boast of such a rate of attracting investments.
China is “to blame” for the reasons for the release of digital currencies of central banks to primary roles in the crypto industry. News of the successful practical testing of the digital yuan throughout the country is forcing other countries to intensify national research on the use of state cryptocurrencies.
The governments of many countries have finally realized that the future of the financial system is precisely in digital currencies. Traditional physical money is becoming less and less popular settlement option year after year. And the one who will be the first to offer a really working infrastructure for the next stage of the evolution of commodity-money relations will be able to claim the role of a new world leader.
China already has the most powerful and dynamic economy in the world. If it comes to the forefront also in the field of international finance, then the US will have to say goodbye to a significant share of its former influence on the world stage. Naturally, no one likes to lose. Therefore, 2021 can be safely called the year of CBDC in the crypto industry.
As for ordinary people, the further development of these two trends will have the most direct impact on them. First of all, they will get cheaper and better access to financial services.
DeFi and CBDC are initially aimed at reducing costs, speeding up customer service, expanding the geography of providing such services, etc. So this year we can expect official status for cryptocurrencies and, of course, their recognition by many states. And this will serve as a powerful impetus for the development of digital money.
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