Key themes for 2020: institutionalization, Defi growth and mass adoption
Blockchain and the cryptocurrency market struggled throughout 2019, with prices up only slightly, Facebook's Libra project failing and the introduction of the Financial Action Task Force (FATF) guidelines. So what is the outlook for the business in 2020 after fierce growth for a number of years? Simon Seojoon Kim, CEO of Hashed, Korea's leading blockchain accelerator, in an interview with JoinD said the biggest issues in the blockchain and cyrptocurrency markets next year will be the market's institutionalization, decentralized finance (Defi) and mass adoption. "Existing financial industry preparing for institutionalization" Expectations for cryptocurrency institutionalization has eased as legislative reform, including that related to mandatory reporting by cryptocurrency exchanges, failed to pass the National Assembly. Nevertheless, financial institutions, including banks and brokerage firms, are already preparing for the eventual passing of the bill. "Once the bill is passed, banks and brokerage firms will be able to legally enter the market as virtual asset operators if they wish to," Kim said. "Traditional financial institutions, including local banks, are already preparing on their entry." The trend of the cryptocurrency market, expanding into derivative products The potential entry of traditional financial players into the blockchain and cryptocurrency markets translates into competition with existing cryptocurrency exchange operators. Major exchange operators in Korea have seen their transaction volumes significantly decline compared to the peak. Kim said even if the existing exchange operators are institutionalized, they would fall behind competition without new business models. Growth of Defi, the start of crypto finance New financial models, which couldn't be realized in the traditional financial industry, are already provided through Defi, or decentralized financial services. One such example is MakerDao, which provides cryptocurrency loans with Ethereum as collateral. This year alone, MakerDao has more than tripled in size. "The cryptocurrency deposited in Defi amounts to 700 billion won," Kim said. "The fact that this amount of money is locked safely [in Defi] is the proof of the industry's growth." The introduction of Libra, China's CBDC and Klaytn leads the industry's growth Kim said Libra, whose project has been stalled due to government concern, will inevitably be launched next year. "China wants to be the world's leader by creating a digital yuan while paving the digital economy expressway through its state-owned BSN (Blockchain Network Service)," Kim said. "The U.S. will [in response] allow Libra, which is led by the private sector." Kim also projected that ground for mass use of cryptocurrency will be set once Kakao's cryptocurrency wallet Klay officially launches in March. "The active users of Ethereum total 1 million - 300,000 DAU and 700,000 bitcoins," Kim said. "If the 50 million Kakao users and 100 million Line users are absorbed into Klaytn and Link, one could see a far larger number of users than expected." He said in the end the key point would be whether there would be a mass adoption. Bitcoin price to reach all-time record next year There is some speculation that the diversification of cryptocurrency financial products and the mass adoption in the blockchain industry will lead to the overall rise in prices. There are those projecting that there would be releases of products or funds that target customers not familiar with cryptocurrency. "Bitcoin's price acts as an index for the public blockchain market," Kim said. "Once public blockchain and the decentralized economy grows, bitcoin's value will exceed 20 million won."