2021 saw a huge increase in price and popularity of Non-Fungible Token (NFT) which tracked the rise in cryptocurrencies and stock market and 2021 was the year that NFT’s became mainstream with celebrity endorsements. However in 2022, NFT’s have declined with cryptocurrencies and dropped in price and volume along with other asset classes as interest rates have risen. But there is wide potential use of NFT that has not yet been explored and it looks like NFT’s will stay as an asset class and a will have a major role in the digital asset ecosystem.
Background: This year prior to starting the war on inflation, the Fed published a paper asking for comments on a Fed coin or a CDBC
Earlier this month, the Presidents Working Group on Financial Markets (PWG) released a report on Stablecoins. This represents first attempt in designing prudential safeguards for stablecoin issuers.
The consulting company, Bain & Company (‘Bain’) released their second annual Technology report recently. There are 3 main patterns identified; (1) Tech is the main disruptive force now in every sector
(2) Cloud Computing will have an extraordinary impact in coming years causing an unbeatable edge for those companies already ahead (Apple, Amazon, Facebook, Microsoft, Alibaba, Tencent). (3)
Geopolitical and regulatory influences on tech companies are more important than before.
Summary of ‘Prediction Machines – the Simple Economics of Artificial Intelligence’ by Ajay Agrawal, Joshua Gans, and Avi Goldfarb
I came across a short and stimulating article by the IMF staff on current state of digital and paper money which identifies essential, conceptual features of all payment types and based on that categorizes them into 5 types. From the paper, I took away three main insights -first there is a compelling argument that traditional forms of payment transactions by banks (referred to as B-Money) will face intense competition from electronic money (or E-Money) in coming years; this will obviously hurt the profitability of the banks given that all retail banks are rely primarily on deposits for funding and will create further disruption in the banking sector. Second, the article conjectures that eventually banks could be forced to offer electronic money or similar products and we can see that happening already with JP Morgan dipping toes into digital money waters by offering JPM Coin by end of 2019. Lastly, role of the central banks will be pivotal as they could jump into the fray and offer central bank digital currency (being explored by Sweden, Uruguay, China, Thailand, Japan and South Korea) and also shape the environment and the pace of innovation for digital money.