Weekly review calendar week 39 – 2021

Not too long ago, Bitcoin and the emerging crypto ecosystem faced quite a bit of criticism from Wall Street proponents. The accusations ranged from fraud to the comparison with the Dutch tulip mania in the 17th century. It’s hard to deny that hype still plays an important role in the industry. However, today’s cryptocurrency market has a functioning infrastructure. There is also a rapidly growing ecosystem of innovative solutions and an increasing number of regulated services. With the introduction of their own crypto-based products and services, Wall Street banks’ initiatives signal a significant shift in attitude toward the asset class. While central banks keep interest rates low and pursue expansionary monetary policies, institutional investors are struggling with record-high inflation rates and low- or negative-yielding bonds. For many investors, Bitcoin is now seen as a safe haven with limited correlation to traditional investment instruments.

The interest of institutional players in cryptocurrencies is difficult to ignore by now. However, regulatory uncertainty is still holding back a number of market participants from allocating their portfolios with
digital assets. Switzerland is in a privileged situation in this regard. Politicians and regulators cooperated early on with crypto companies to create a comprehensive legal framework. This approach has now been underlined with the approval of the first swiss-based crypto fund by the Swiss Financial Market Supervisory Authority FINMA. The fund project is part of a cooperation between three companies from the Crypto Valley and represents an important step for the accessibility of cryptocurrencies as an alternative asset class.

Decentralized finance (DeFi) is a new financial paradigm that brings significant benefits. By mid-September 2021, DeFi transactions worth no less than USD 88.7 billion had taken place. However, the associated risks are also significant and challenging in the regulatory arena. The current debate in the U.S. suggests that an enforcement approach using existing financial laws is not well suited. The basic problem comes from the fact that the text of the law is built on the concept of a centralized intermediary – a circumstance that does not exist in DeFi by definition. For services to be widely adopted, comprehensive regulation is essential. Rather than applying existing structures to the new sector, a pragmatic approach may be more appropriate.

Only In August, Opensea, the most popular marketplace for NFTs, had an average daily volume of USD 1 billion. But are NFTs really worth the hype – or even an investment? To understand NFTs, it’s helpful to know some aspects of the blockchain. It’s about considering relevant use cases and grasping existing examples that are the fuel behind the hype. It seems NFTs have contributed significantly to the pace of crypto adoption this year. Perhaps more importantly, NFTs have finally succeeded in attracting a very different group of newcomers to the industry who are not interested in fiscal ideals, complex DeFi-yield farming, or automated market-making. In a three-part series, Fabian Zbinden analyzes the emerging field.

In addition: The connection of unique blockchain tokens with rare items is possible as of now thanks to NFTs. This opens up a foundation for digital collectibles. Traditional stamp collecting is also reaching the next level thanks to this technology. After the Austrian Post, the Swiss Post is launching the country’s first crypto stamps. At first glance, a “Swiss Crypto Stamp” looks like a conventional postage stamp. Like any other stamp, it can be used to frank mail. However, each physical stamp also has a digital twin, which is stored on the blockchain in the form of an NFT. The digital version can be viewed, exchanged and traded.