The crypto industry is poised for a new growth cycle, marked by a focus on compliance and user experience, as well as increasing institutional involvement. We went to Barcelona to discover the latest trends:
Activity in the crypto space is picking up. October saw the highest monthly spot trading volume on centralized exchanges since March 2023 and the largest month-over-month percentage increase since January 2021, according to today’s report from CCData. The same study shows that BTC and ETH options volume on CME increased by 142% and 107% to $1.75 billion and $532 million, respectively. This is an absolute record for both products.
Spring (crypto) is in the air, which naturally raises the question of priorities and directions for the next cycle. The European Blockchain Convention, which recently concluded in Barcelona, could offer some insight on this subject. The event was heavily focused on crypto-finance in all its iterations: DeFi (decentralized), CeFi (centralized), and TradFi (traditional).
Here’s a look at the top trends in European crypto finance, as seen at the conference, on stage and off.
DeFi: Privacy and Compliance
For a long time, privacy and regulatory compliance were considered almost incompatible attributes. And yet, they are both important to the DeFi space.
This conundrum has encouraged numerous technological experiments, where developers of privacy-centric protocols have brought compliance possibilities. Alephzero chose to work closely with regulators, Secret Network used zk (zero knowledge) disclosures, and Panther Protocol enabled a voluntary data sharing mechanism. Although not specifically focused on DeFi, these protocols can serve as a foundation for DeFi applications.
Biokript, an exchange, addressed this problem by combining features of centralized and decentralized exchanges.
Interoperability is still an important direction, with services like expand.network and Paraswap offering access to multiple DeFi protocols through a single API, significantly improving the user experience.
CeFi: diversification and user experience
User experience was also a key concern for CeFi firms. At the conference, Codego offered various white-label solutions for businesses and banks interested in using crypto, Fireblocks presented its custody solutions, while Taurus and Unicoin focused on investments in tokenized assets.
Interestingly, the number of small crypto exchanges present at the conference was remarkably high: Bit2me, zondacrypto, Cryptology, Bitvavo, WhiteBit… As Binance’s dominance wanes and compliance becomes the biggest obstacle, exchanges regional governments can seize the opportunity.
Venture capital firms, such as Outlier, Fabric, Coinbase, AngelBlock and Deus X Capital, have spoken about the negative effects of the bear market on private equity. Unsurprisingly, this has led to higher requirements for startups, including more mature proofs of concept and a well-established community.
Among the main areas of interest for VCs, zk technology was at the top, along with user-friendly Layer 1s and new trends, such as DeCom. Short for Decentralized Commerce, it describes projects that introduce decentralized tools into e-commerce.
TradFi: investment and tokenization
The institutional presence at this edition of the European Blockchain Convention broke all records. Representatives of most major financial institutions could be seen there, such as BPI, Crédit Agricole, BNP, Caisse des Dépôts, UBS, Banco Santander, Standard Chartered, Citibank, DZ Bank. Insurers like AXA and depositories like CACEIS were there. also present.
The aspirations of these players could be summed up in the words of a representative of TP ICAP, the world’s largest broker-dealer. It launched its crypto department in 2017 based on two hypotheses: “crypto will become an institutionally investable asset class” and “financial market infrastructure for traditional asset classes will be disrupted by tokenization.” Six years later, more and more financial firms seem to agree.
The crypto market started as a retail movement, but is now rising to the institutional level. The evolution of the customer base is a striking illustration of this: a few years ago, specialists like Fidelity provided crypto services mainly to wealthy individuals. Over time, these clients turned to their family offices, then to their hedge funds, then it was the turn of traditional asset management and pension funds.
Tokenization of real-world assets has been a key topic in virtually every discussion involving institutional players. Companies are actively exploring their opportunities and, unlike several years ago, they no longer mention “private blockchains” or similar notions. It seems that the idea that a blockchain could be permissioned has fallen off the radar of institutional players, allowing them to focus on the technology that works.
Overall, the long bear market seems to have forced companies to focus on creating a better product, while institutional players finally decided to embrace blockchain instead of fighting it.