In recent years, we have witnessed an increasing use of the blockchain, a sequential data structure that, if a previous block in the chain is modified, requires all subsequent blocks to be modified. This is only one of the factors and economic incentives that characterize its security). The blockchain assumes a native digital asset to provide the economic incentives for its maintainers: without the seigniorage rents associated with its native asset, a blockchain system would need to elect its maintainers, thus falling into a centralized paradigm and consequently losing completely its meaning. Therefore, given the central role played by digital native assets for the functioning of the blockchain, it is understandable how this new economy, as a real-world use case, primarily needs financial services developed for its digital assets.

Before analyzing in detail the financial services related to blockchain digital native assets, it is necessary to first present in general how cryptocurrencies are defined in the legal sphere. In Europe, according to the European Banking Authority (EBA), virtual currency is defined as “a digital representation of value that is neither issued by a central bank or public authority nor necessarily attached to a FC, but is accepted by natural or legal persons as a means of exchange and can be transferred, stored or traded electronically”. Later, in the more recent Regulation on Markets in Crypto-Assets, crypto-activities were defined as “a digital representation of value or rights, which may be transferred and stored electronically, using DLT or similar technology”. From the vagueness of the definitions, we can therefore guess that it is not easy to give a precise definition of cryptocurrency and crypto-assets, as these are constantly evolving phenomena. 

On the other hand, from a crypto ecosystem perspective, a few macro-categories have now been established: (i) cryptocurrencies designed for settlement, value exchange and/or value storage (e.g., BTC, Stellar, Ripple); (ii) cryptocurrencies designed as platforms for business and project development (e.g., Ethereum, IOTA, Cardano, Polkadot); (iii) internal cryptocurrencies in specific business projects (e.g., Binance Coin, Huobi Token). Over the next decade, a new digital economic and monetary system is likely to emerge, and that’s what we want to talk about. 

A new paradigm: crypto standards and Daniele Marinelli

Many are unaware that the coming decade, thanks to the new paradigm introduced by cryptocurrencies and the “Bitcoin standard,” could significantly change our current payment paradigms. 

After the imminent launch of the Chinese central bank’s digital currency, other countries, in order to avoid China’s assertion of a worldwide hegemonic position in digital state currencies (“CBDCs”), could launch, in turn, their own CBDCs. It is also likely that entire business units will use blockchain, especially in the form of multichain or parachain. We will thus witness the transformation of the global financial system into a new digital system, both on the public and private sides.

If we think about the evolution of the monetary system in modern history, we can see that cyclically, every forty years or so, there are times when the existing system creates shortages, it is inefficient, or simply when states do not respect the agreements made with their citizens or at international level. This usually coincides with major technological changes and with the growth of the world’s population (with the consequent need for larger amounts of money). Often, after a strong intensification of trade relations between countries or during a crisis such as a war, a new monetary cycle follows. And the case of technological change seems to be the one that concerns us and that will most likely lead to a paradigm shift for this generation. 

Daniele Marinelli: are we close to a global change in the monetary system?

Already with the global financial crisis of 2008 and the G20 summit, the fate of the current monetary system was partially questioned. This was followed by the launch of the Bitcoin protocol in 2009, which laid the foundation for a fully digital financial system. According to various economic parameters and according to many analysts, we are close to a global financial crisis, but it will probably not be similar to the previous ones: the collapse of the current monetary system goes hand in hand with disruptive technological advances (the Bitcoin protocol, artificial intelligence, the adoption of quantum computers, to name just the main ones).

However, the crises, even when painful, have shown that most of the changes actually benefit humanity and provide new opportunities for further development. However, a less traumatic transition could be achieved through a cooperation between the traditional financial system and the new crypto players.