23rd December 2019

A Look Back at 2019 in Crypto

There is a tendency for people in crypto and blockchain to send around their forward looking estimates of what the year ahead will bring for cryptocurrency and blockchain around this time of year. Usually that’s filled with price predictions and bold statements. In order to break with that, we decided to look back at some of the important developments over 2019.

Stablecoins

One of the big themes of late 2018 and coming into early 2019 was the fascination with stablecoins. In February we presented an overview of the types of stablecoins in the market and the history of the concept. JP Morgan had just announced their plans to launch a JPMCoin which would help their institutional clients transfer balances across JP Morgan. The bank went on to further leverage their Quorum platform and bring hundreds of partners from banks, to large asset managers and corporates into their Interbank Information Network (IIN) which sought, in part, to leverage this token. While it got quite a bit of buzz from the media at the time, this story has been relatively quiet lately. 

Part of this could be due to the even more celebrated stablecoin announcement, and arguably the story of 2019: Facebook supported Libra. The project was met with a mix of excitement and worry from the community and regulators. Libra continues to work its way towards a potentially more acceptable proposal which may or may not include a single global currency backed by large currencies. This is likely to remain a story in 2020, but I won’t make any predictions on what will happy, so I guess you’ll need to keep reading.

Securities Tokens

The other big theme in the first half of 2019 was securities tokens, we talked about companies working to offer stocks and bonds built on tokens back in January. Many pundits at the time described a myriad of benefits from this development, and project went on to raise, many others realised the complexities of securities regulation as well as the costs that could not be improved through technology. At the time I mused:

“While, personally, I remain unsure of many of the promises of efficiency and new liquidity which many security token-supporters claim will come as a result of tokenisation, particularly when the cost of regulatory compliance is added on at the service provider level, it would be wrong to entirely discount this phenomenon. Should issuers and investors truly find benefits from tokenisation, service providers who have started to make inroads could benefit in scales which dwarf the 2017 ICO phase by an order of magnitude.”

This continues to be an area of focus for many companies, but has yet to become the thing in crypto, maybe 2020 will be the year that securities tokens come of age.

Regulatory Fall-out of ICO Mania

Closely linked to what we saw as a potential avenue of opportunity with security tokens that attempted to follow the law, we started to see what eventually became of those companies in 2017 that absolutely refused to follow the law, or just put a Band-Aid over regulatory challenges with a number of SEC settlements being announced. In November we discussed social media messaging apps Kin, and the Kik token, as well as Telegram receiving the full force of the US securities regulators. The company behind EOS, Block.One, also announced settlements with the SEC. All of this cast a shadow over the efforts from the industry to categorise who was most likely to be deemed a security, including the Crypro Ratings Council (CRC).

While ICOs and their cousins, SAFTs, seemed to be regulated to history, another form of the same concept had a lot of traction in early 2019, the Initial Exchange Offering (IEO). Though that too seems to have only shifted some of the economic questions, not the legal questions.

While I will still not make predictions for 2020, I will say that given the scheduling of court cases, including Telegram’s day in court, currently set for mid-February, we are not out of the woods yet on this front.

DeFi

If you’re a fan of Ethereum based projects, the unescable trend in 2019 was Decentralised Finance (DeFi). The industry looked beyond purely offering decentralised exchanges (DEXs) built into the smart contracts platform (as well as in other blockchains), and began to focus on offering more complex financial products. This included lending/borrowing, market making and derivatives. This trend, which we covered in March, seems to have made the most ground in 2019. At the time, I said: 

“As always, there are lots of unknowns, as well as more than one or two things that have raised eyebrows at regulators and law firms alike. It will be an exciting space to watch develop, and may lead to interesting new innovations, but we’re also very likely to hear of less rosy stories as well.”

Something that, while I won’t make it a 2020 prediction, I still think is likely to be something to consider.

The end of the year saw the largest project in this segment, MakerDAO, shift to version 2.0 and begin to utilise more tokens to support its crypto-backed stablecoins.

Whew!

So quite a year, not sure how your crypto portfolio fared, but hopefully you’re happy with it. All the best, and we’ll see you in 2020!

As always, nothing here should be construed as financial advice, recommendation or endorsement of any project or cryptocurrency.