A significant part of blockchain’s appeal and enduring sustainability as both a tool and a platform is inherent in its use of digital assets and the role those assets will play in the future of commerce. While most commonly associated with cryptocurrencies such as bitcoin and Ether, digital assets are much more diverse and can be used for a variety of purposes.
We define a digital asset as “something represented in a digital form that has intrinsic or acquired value.” In recent years, the term has come to include those assets that are represented, held, and transacted on a blockchain or blockchain-like network. Aside from cryptocurrencies, examples of digital assets may include everything from digital representations of land, commodities or fiat currency, to tokenized debt or equity, to a financial instrument, and beyond.
Digital assets offer their users many benefits, including the tokenization of physical asset facilities, allowing for easier, more frictionless trading on secondary markets. They provide a heightened degree of historical transparency and record of provenance. And because digital assets allow for larger, more indivisible assets to become divisible, they can help create a more inclusive, accessible trading ecosystem.
An outright majority (53%) report that digital assets will be very important. Both figures affirm the potential of digital assets and are significant considering blockchain’s growing overall importance.
Further bolstering the perceived importance of digital assets is the fact that 83% of survey respondents said they strongly or somewhat believe they will serve as an alternative to, or outright replacement for, fiat currency in the next five to 10 years. In China, that figure rises to 94%.
While our survey revealed great faith in digital assets’ future importance, it shows no clear or specific consensus about exactly how those assets will be used or the specific role they will play—a kind of incoherence that we have seen in blockchain use cases in the past and today.
In light of these and other benefits, it’s no surprise that our survey respondents view digital assets very favorably. Nearly 89% said they believe that digital assets will be very or somewhat important to their industries in the next three years. An outright
But their importance is nonetheless manifest across an array of use cases, from IP rights management to facilitating track-and-trace to virtual representation of an equity instrument and beyond. While this likely won’t shake out immediately, we expect more use cases to develop as organizations gain additional experience and increased comfort levels with blockchain in general and digital assets more specifically.
Despite their many benefits, digital assets’ growing adoption raises potential issues regarding new tax and regulatory compliance for both businesses and regulators.
Even so, a vast majority of survey respondents expressed confidence that they will meet their regulatory burdens. Some 80% claimed to be very or somewhat prepared to deal with the regulatory aspects of digital assets: Know Your Customer, tax, GAAP/FAS, etc. However, it is unclear from our data whether organizations are fully prepared for the considerable compliance challenges looming in the future, including process, policy, and alignment of governance.8
A fundamental question remains: Are those who adopt still-evolving digital assets fully aware of the cross-border regulatory compliance and professional guidance challenges that continue to emerge? This may not be an easy question to answer, as individuals and organizations evolve their own thinking about—and tolerance for— adopting blockchain and digital assets.
Following the technology continuum
Today, we are witnessing new and significant changes across all facets of society, including how we shop, the way we pay for things, how we bank,
how we access and disseminate information, how we travel, and how we manufacture—from assembly lines to automated processes. Artificial intelligence (AI) is now a leading contributor to that change, making machines smarter and processes more efficient through technologies such as robotics and 3D printing.
Of course, what we are seeing with digital assets is just another waypoint on this technology continuum, with each major change delivering great promise and great disruption. As always, the change process takes time and often takes place without most people even realizing it’s happening.
Businesses—and eventually, customers and end users—learn to adapt to the latest technologies and solve the other issues that accompany assimilation of change, such as regulatory and use case priorities. We expect that the adoption of digital assets will follow a similar path. Even as these technologies rapidly advance, we have a long way to go in the full adoption cycle, which will take time and a change in thinking about digital assets. Accountability challenges must be appropriately managed, and people will need to develop realistic ideas about what digital assets are and what they are not.
While digital assets may be the future, there remains an important, immediate need for organizations to become more comfortable with them, especially in terms of barriers to adoption and regulatory hurdles.
Throughout the EU (including the United Kingdom for our purposes here), blockchain remains a matter of priority, with different markets adopting distinctly positive, albeit different, approaches to the technology. In Germany, blockchain has gained new momentum as policymakers have actively engaged the legislative process. Examples of such legislative initiatives include the publication of a draft law to regulate the offering of cryptocurrency tokens, as well as public support and promotion of lighthouse projects that use blockchain technologies in the national administration. There is also substantial activity around the development of cryptocurrency regulation that might cast Germany as a safe regulatory environment for cryptocurrency activity.1In the Nordic region, we’re seeing continued growth around DLT, which both local governments and business are using.17 The UK market is seeing ongoing and increasingly mature activity across key sectors with several substantial projects now live, typically among industries reliant on complex, multiparty, and international supply chains. Additionally, we are seeing a hastening of activity linked to digital assets, both in the traditional sectors as well as in areas such as custody services.18
Concluding thoughts: The road taken
Over the past year, we have witnessed progress in the adoption and implementation of real-world blockchain- enabled solutions across a variety of businesses and sectors.
Attitudes toward blockchain have obviously, and measurably, shifted as executives and business leaders implement blockchain-enabled solutions, whether they be through the use of digital assets specifically or innovative applications of blockchain more generally. Organizations have stepped up their investments, demonstrating their commitment to blockchain technologies.
Still, progress along the implementation continuum is not always detectable to the naked eye. Only by looking more closely and viewing how organizations are responding to challenges with cybersecurity; global digital identity; compliance with established accounting, audit, internal control, tax and financial reporting frameworks; and governance and other consortium-related issues can we see that blockchain has already pivoted from the realm of the possible into the world of the practical. Our survey again demonstrates real doing across industries and regions versus mere planning, which was a hallmark of our first survey in 2018.
Blockchain was once recognized only as the foundation for cryptocurrency; today, leaders accept it as a robust solution that enables advances in 3D printing, AI, digital security, and beyond. And these are not mere words but hard-dollar strategic investments made by individuals and organizations that view the world through a strategic prism.
Blockchain already is an integral and vital tool upon which—and with which—new, cutting-edge solutions are being created, and we are confident that blockchain solutions will gain even greater traction within the global business community over the next 12 to 24 months.
- Blockchain Technology Solutions: What is Self-Sovereign Identity and what is it for?
- Success against # COVID19 should thank blockchain solutions in critical scenarios
- New York Times explains the evolution of #Blockchain #technology in 2021 with its origins in cryptocurrencies
- Reflection on the real and true importance of #blockchain #technology in the #supplychain, today
- #Blockchain technology participates in the global distribution of vaccines against #COVID-19