When he joined government, Zimbabwe’s Minister for Finance and Economic Development, Mthuli Ncube seemed relatively bullish about cryptocurrencies. But a year before Ncube’s appointment, Zimbabwe’s central bank ordered all banks to stop processing transactions involving cryptocurrencies, calling the likes of Bitcoin and other altcoins “the currency of choice for money launders and other criminals”.  The decree saw crypto traders close shop and fall off the radar of government authorities.

This wasn’t the first time we’ve heard this misconception in the crypto world and it was certainly worth a collective eye roll. However, Zimbabwe is hardly alone. A lot of governments around the world have also placed restrictions and even all-out prohibitions on the trading and use of cryptocurrencies as they try to strike a balance between reaping the benefits of blockchain innovations without losing control over monetary systems and policy. Still, there remains a narrative that cryptocurrencies are used “mainly for illicit financing” but the data shows otherwise

The majority of cryptocurrency is not used for criminal activity. According to an excerpt from Chainalysis’ 2021 report, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, the criminal share of all cryptocurrency activity fell to just 0.34% ($10.0 billion in transaction volume). 

Further, according to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity. This means that criminal activity using cryptocurrency transactions is much smaller than fiat currency and its use is going down year by year.

The call for decentralised finance goes beyond sheer enthusiasm for blockchain technology. Nearly three million Zimbabweans live abroad and the money they send home accounted for just over 7 percent of the country’s economic output last year, according to the World Bank. But middlemen take a sizable chunk of the remittances for themselves with high commission fees generally between 10 and 20 percent to facilitate money transfers from abroad.  With disruptive blockchain technology, the cost can come down significantly,” said Clive Mphambela, chief director of communications for the Ministry of Finance. “The uses of blockchain are far wider than just crypto. We even have a sandbox group to analyse the use of blockchain tech in Zimbabwe created by the Reserve Bank,” he told Al Jazeera.

Further, there are almost two billion people in the world without a bank account. In Zimbabwe, the unbanked are shut out of the formal economy and forced to work illegally. Accelerating the adoption of cryptocurrency may solve the remittances crisis and build a framework for a more decentralised economy.

In El Salvador, for example, 70% of citizens are unbanked and roughly one-quarter of the working population lives in the United States, from where they send remittance payments to their families back home. In the future, these payments could be made using crypto, which would dramatically reduce cross-border fees and allow families to send crypto to their loved ones across borders in an instant. Unlike regular banking, sending crypto doesn’t require families to have a home address or ID documents, which many lower-income people lack. All they will need is a Wi-Fi connection and a digital device to start using crypto and to make secure transactions on the blockchain networks cryptocurrencies run on.

The fast-growing decentralized finance (DeFi) system, the collection of finance applications built on blockchain technology, holds promise for a new financial architecture that can eliminate the need for traditional intermediaries (such as banks, brokers, and exchanges) and reduce rents (excess profits) in the financial sector.

The world of NFTs, DeFi & Metaverse

In 2021, the crypto market reached a market cap of $3 trillion, while China imposed a complete ban on cryptocurrency trading and mining. In a dramatic year for cryptocurrencies, new trends such as non-fungible tokens, decentralized finance (DeFi) and metaverse have emerged as prominent highlights in the crypto space.

Non-Fungible Tokens, or NFTs, are a new type of digital asset that helps claim and verify unique ownership. They have also emerged as a viable option for offering partial ownership of conventionally illiquid assets such as precious metals. Last year in February, a piece of digital art sold at auction for $69 million. That's how the magic of NFT caught the world's attention.

Regardless of the conflicting views on NFTs, they are a trusted tool for redefining the approaches through which users would interact with the web. In addition, NFT trends also show their potential influence on buying and selling art or creating and experiencing music.

In 2023, we expect NFTs to grow as a tool for utility rather than just promoting art. NFTs will expand more into gaming and provide access to rare communities generally associated with web 3.0 marketing and avatar casting.

The prospects for the metaverse seem quite promising, especially with many companies like Facebook and Epic Games investing billions of dollars in metaverse development.

Further, renowned international fashion retailer, H&M, has opened its virtual store in the metaverse. H&M created a store in the virtual city "CEEK" in the metaverse and allowed customers to shop in the metaverse. Shoppers can use CEEK coins to make purchases in the H&M store metaverse.

In a broad sense, you can see how NFTs and the metaverse are closely related. So where does the next major trend, i.e. DeFi, fit in? If the metaverse offers the environment and NFTs offer tokens to interact with the environment, DeFi offers the infrastructure for financial transactions. DeFi has the potential to transform the crypto space, and the $236 billion total value of assets locked in DeFi protocols shows its importance.

The rapid adoption of Web 3.0 trends by users and markets would facilitate the merging of digital assets with conventional forms of finance. The benefits of decentralized protocols and distributed architecture are clear for issuers, especially when raising capital. In addition, the introduction of new tools at the institutional level and a compliant infrastructure can support the digitization of assets.

The future of the Blockchain ecosystem

The debate about which smart-contract-enabled blockchain ecosystem will dominate is relatively still undecided. The prevailing view is that we will live in a multi-chain world in which multiple blockchains can transfer information and value to each other. However, it can be predicted that Bitcoin will remain the number 1 blockchain and Ethereum the number 2 blockchain, at least in the near future, considering the price points. Another relevant development will be rollups or layer 2 protocols that will enter into a competitive relationship with layer 1 blockchains. They promise lower transaction fees and faster transactions while benefiting from basic base layer security. In addition, interoperability between different blockchain ecosystems through bridges and cross-chain protocols is also being diligently worked on. Last but not least, with Polkadot and the Cosmos Inter-Blockchain Communication Protocol (IBC), there are efforts to create a kind of layer 0, which is a network of different blockchains able to communicate with each other.

What is interesting and important here is that all these solutions are public blockchain solutions. Closed blockchain infrastructures, which only a few years ago were expected to find application in an enterprise context (enterprise blockchains or permissioned blockchains) and were given considerable importance, play a smaller role. This especially applies to platforms like Hyperledger or R3 Corda. Of course, applications will be developed on these infrastructures with limited access. But it is already clear that public blockchains have won this race. This can be determined using metrics such as transaction throughput, transaction volume, market capitalization (mapped assets) or even developer activity.