by SHAZNI ONG
CRYPTOCURRENCIES are expected to remain important for players, operators and the industry alike come next year, said Luno Malaysia Sdn Bhd.
The leading cryptocurrency firm said it has seen a significant change in the way digital assets have been exchanged, traded and used through 2019, which sets 2020 to be a very exciting year for altcoins.
“The theme for 2019 was a move from dramatic speculations to a relatively more stable environment with traders using altcoins to diversify their investments, providing
potentially higher returns as markets moved to risk-off positions.
“This was in part brought about by the take-up of coins by a greater number of institutional investors, which balanced out short-term speculators with longer-term strategies,” the firm said in a statement yesterday.
Luno noted that cryptocurrencies have slowly become part of everyone’s financial landscape which leads to three main predictions for next year, namely on regulation, adoption and transition.
Luno said with the crypto space maturing rapidly, regulators around the world are already accelerating their efforts to either embrace or regulate against cryptocurrencies.
This escalation in pace was definitely motivated by Facebook entering the space with its Libra project, the firm noted.
“We expect to see this continue next year. We will also see a number of guidelines planned for next year come into effect,” it said.
In October, the Group of Seven organisation outlined the need for stable coin regulation, implying that guidelines or laws may be produced next year. Japan also passed a bill in May that will reinforce its existing cryptocurrency laws, coming into force in April next year.
Luno highlighted that one major regulatory development coming next year is the introduction of the 5th Anti-Money Laundering Directive (5AMLD).
“For firms buying and selling crypto assets, the 5AMLD will require them to register with national financial regulators. It also states minimum requirements for AML processes, similar to those we see with traditional asset classes.
“The specifics of how these regulations will impact the space are hard to predict. There will, however, be lessons to learn for best regulatory practices that other regions can emulate if successful,” it said.
On adoption, it is expected that more institutional investors — banks, hedge funds, pension funds and endowments — buy into cryptocurrencies as they diversify their portfolios and finally have the professional machinery to do so.
For transition, Luno said it has a number of major events that allow crypto currencies to transition into a new role in global financial services in 2020, with the flagship project for this change has been Libra.
The Libra project has drawn criticism from all sides, with regulators lining up to grill Facebook CEO Mark Zuckerburg and Libra CEO David Marcus.
Despite the bashing, they have persevered. On Oct 21, organisations officially signed the Libra Association charter at the project’s inaugural meeting in Geneva — with Andreessen Horowitz (legal name AH Capital Management LLC), Vodafone Group plc, and Uber Technologies Inc among the many big names.
“The project is developing rapidly. 40 wallets, tools and block explorers plus 1,700 GitHub commits have now been built on its blockchain test net that has seen 51,000 mock transactions in the past two months.
“Libra nodes that process transactions are now being run by Coinbase, Uber, BisonTrails, Iliad, Xapo, Anchorage and Facebook’s Calibra. This puts it on track to deploy its main net in 2020 as planned —regulatory concerns permitting,” Luno said.
With Libra planning to sign up to 80 more members to the project, Luno foresees its potential impact as tremendous. Luno also said there will be a halving, which is a recurring event in which the number of bitcoin rewarded to miners is cut by half.
“They are programmed to take place every four years, or once every 210,000 blocks until 2140 when all 21 million bitcoin is estimated to have been mined. These four years are now almost up, with the next halving set to take place in May 2020.
“This halving will see the block rewards falling from 12.5 to 6.25 bitcoin. Experts believe that this increases demand for the cryptocurrency by further restricting
supply,” the firm said.
“However, the cryptocurrency space has matured since then, with the traditional financial industry and some of the world’s biggest technology companies taking an interest in bitcoin. That makes this halving more unpredictable than ever, with no guarantee that there will be another bull run as in 2017,” it added.
In addition to these trends, Luno said it would continue following the development of crypto in Asia.
“We have seen Malaysia welcoming crypto companies back into the region (including Luno), while South Korea and Thailand have also started to implement new regulations that should pave the way for the advancement of crypto.
“There are rumours that 2020 could see China making a big move in the space with the introduction of its own digital currency,” it said.
Luno also noted that the long-awaited ethereum 2.0, codenamed Berlin, is expected to finally be launched, which the firm opined could see the death of initial coin offerings and with many people sitting on the fence over privacy coins.
“We started 2019 with bitcoin at US$3,843 (RM16,004) with a daily volume of US$4.3 billion and at the end of this year, we are around US$7,200 with a volume of US$17 billion, having peaked at US$13,016.23 on June 25 with US$45billion of bitcoin being traded,” it added.