A look back at the pivotal cryptocurrency adoption milestones of 2023.
2023 was marked by a series of significant developments and crypto adoption stories from around the globe, reflecting the ever-dynamic nature of the crypto industry.
From major financial institutions like BlackRock stepping into the crypto space to the entry of new players like EDX Markets into the crypto exchange arena, here are some of the stories that everyone was talking about last year.
Asia embraces crypto with open arms
As highlighted by Chainalysis’ “2023 Global Crypto Adoption Index,” India, Vietnam and Thailand emerged as leaders in grassroots cryptocurrency adoption, with lower middle-income (LMI) countries showing a significant interest in digital assets.
Despite a downturn in global crypto engagement following the 2022 collapse of crypto exchange FTX, LMI nations demonstrated a robust recovery, surpassing their adoption rates from the previous bull run of 2021.
India stood out as a major player because not only did it lead in grassroots adoption, but it also ranked as the second-largest crypto market globally by transaction volume. Furthermore, India’s unique tax deducted at source scheme on cryptocurrency transactions, which imposes a 1% tax to be deducted from the user’s balance at the time of trade, exemplified the country’s specific approach to managing crypto transactions.
Crypto regulations and legislation
Over 40 countries were actively involved in advancing regulations and legislation focused on cryptocurrencies in 2023, as highlighted in a report by Big Four consulting giant PwC. The efforts were broadly categorized into four main areas: regulating stablecoins, compliance with the Financial Action Task Force’s Travel Rule, licensing and registration, and overall development of a crypto regulatory framework.
The report reveals differing levels of engagement among countries. While some — such as Japan, the Bahamas and various European Union states — showed comprehensive involvement across all focus areas, others — such as Uganda, India and Brazil — limited their focus to one or two sectors, reflecting a more cautious approach to the crypto industry.
The Travel Rule, in particular, emerged as the most universally discussed topic, with 40 out of the 43 countries engaging in it. In contrast, guidelines for stablecoin issuances received less attention, with eight countries, including India and Brazil, not addressing this issue in 2023.
BlackRock goes all in on crypto with dual ETF filings
In June 2023, the world’s largest asset manager, BlackRock, submitted an application with the U.S. Securities and Exchange Commission to establish a Bitcoin (BTC) exchange-traded fund (ETF), a landmark move that seeks to introduce the first product of its kind in the United States.
The filing designates Coinbase as the custodian of the ETF’s assets and provider of pricing data. In December, BlackRock updated its proposed filing to allow cash redemptions so as to maximize its approval chances.
In November, the firm filed for a spot Ether (ETH) ETF, doubling down on its cryptocurrency bets. The applications marked a significant step in the evolution of cryptocurrency investment vehicles in the U.S., especially considering that the SEC has previously only approved Bitcoin futures ETFs while repeatedly denying applications for spot ETFs based on Bitcoin.
Spain registers a 56% increase in cryptocurrency firms
The number of crypto companies registered in Spain saw a significant growth of approximately 56% in 2023. The official registry, available on the website of Spain’s central bank, revealed that 30 companies received a virtual asset service provider license, including several international platforms such as Revolut, Bitpanda, Crypto.com and Vivid.
Spanish regulators have been actively engaging with the crypto market, as highlighted by the fact that in October, the Spanish Ministry of Economic Affairs and Digital Transformation announced the early implementation of the European Union’s Markets in Crypto-Assets regulation six months ahead of its initial deadline.
In November, the Spanish Tax Administration Agency introduced Form 721, a new tax declaration form for digital assets held abroad.
Real-world asset tokens garner significant mainstream backing
The tokenized real-world asset (RWA) market experienced remarkable growth in 2023. According to the Boston Consulting Group, the industry is expected to reach a valuation of $16 trillion by the decade’s end. This growth spanned various asset categories, with the total value of tokenized RWAs reaching a peak of $2.75 billion in August.
The real estate sector, in particular, saw a significant impact from this technological advancement. The value of on-chain real estate surged by 102% between the first and third quarters of 2023, equating to an increase of approximately $90 million. Similarly, during Q3 2023, the valuation of tokenized U.S. Treasury bills, bonds and money markets also scaled up to an impressive $685 million.
This trend was bolstered by strong interest from institutional investors. A joint survey by Celent and BNY Mellon revealed that a staggering 91% of institutional investors had shown interest in investing in tokenized assets, with 97% agreeing that tokenization could revolutionize the asset management industry.
Hong Kong allows retail investors to start trading crypto
In August, Hong Kong took a significant step to enhance its emerging crypto economy by opening the doors for retail investors to engage in digital asset trading.
To protect its investors, the Securities and Futures Commission (SFC) of Hong Kong implemented a rigorous licensing regime that included stringent rules for digital asset companies, such as conducting client checks to exclude retail traders from China, where crypto trading is prohibited. Among the first entities to be granted these licenses were HashKey, Victory Securities and OSL.
More recently, the SFC, in collaboration with the Hong Kong Monetary Authority — the region’s central banking institution — announced its readiness to review applications for digital asset spot ETFs.
Turkish citizens flock to Bitcoin amid hyperinflation
Turkey experienced a significant increase in its number of crypto users, with the metric rising to a sizable 52%, according to a survey carried out by crypto exchange KuCoin. The surge seems to have come in response to myriad economic factors, particularly growing inflation concerns in light of the Turkish lira’s substantial devaluation against the U.S. dollar. The trend isn’t isolated to Turkey alone, with similar patterns observed in other countries facing inflationary pressures, such as Brazil and Nigeria.
The survey also revealed investment motivations among the Turkish population, with 58% of respondents noting that they were primarily investing to accumulate wealth over the long term, while 37% saw crypto as a store of value. Bitcoin emerged as the most favored cryptocurrency, with 71% of investors holding the asset.
The study also highlighted the increasing participation of young women in Turkey’s cryptocurrency sector, with 47% of investors in this demographic being female.
The influence of social circles, including recommendations from friends and family, played a significant role in encouraging people to invest in cryptocurrencies.
Wall Street-backed crypto exchange EDX Markets goes live
June 2023 saw a new player make its way into the cryptocurrency exchange arena: EDX Markets. The platform made its highly awaited debut after securing backing from major financial institutions such as Citadel Securities, Fidelity Investments, Charles Schwab, Paradigm, Sequoia Capital and Virtu Financial.
As part of its expansion plans, EDX Markets also completed a funding round helmed by investors such as Miami International Holdings, DV Crypto, Global Trading Strategies, GSR Markets and Hudson River Trading.
Canton Network debuts with significant backing
A new blockchain network aimed primarily at financial institutions, called the Canton Network, was announced on May 9. The project has backing from prominent players such as BNP Paribas, Cboe Global Markets, Digital Asset, Paxos, Microsoft, Goldman Sachs and Deloitte, among others.
The goal of the system is to enable the synchronization of financial markets that had previously operated in silos.
The network is built on Daml, a smart contract language designed to create an interoperable system where assets, data and cash can synchronize across various linked applications.
German banks start offering crypto custody
Earlier this year, a number of major German financial institutions entered the crypto fray. For instance, Deutsche WertpapierService Bank (Dwpbank) launched its wpNex crypto trading platform, thereby opening up the digital asset industry to a wide network of 1,200 banks in Germany.
Similarly, DZ Bank, recognized as the third-largest bank in Germany by asset size, also unveiled its digital asset custody platform. The system is designed to serve institutional clients, offering them access to crypto securities.
DWS Group, an asset management company majority-owned by Deutsche Bank, announced plans to venture into the crypto realm soon, focusing largely on developing exchange-traded products in the European market, along with other digital solutions.
Other traditional banks, including Commerzbank and DekaBank, are also seeking crypto custody licenses from Germany’s financial watchdog, the Federal Financial Supervisory Authority, better known as BaFin.