Digital Assets and DLT: A Year of Growth and Challenges
A comprehensive report recently released by Citi delves into the intricate landscape of digital assets and distributed ledger technology (DLT), analyzing their evolution, challenges, and regional variances over the past year. On August 23rd, Citi unveiled an all-encompassing analysis that encapsulates the progress and hurdles witnessed by the digital assets and DLT sector. Despite facing setbacks in 2022, particularly affecting certain crypto enterprises like FTX, the study presents an upbeat perspective on the developmental trajectory of DLT and digital assets.
Emerging Trends in Adoption
The report indicates that an increasing number of companies have now entered into engagement with, and exhibited interest in, DLT and digital assets. The data reveals a remarkable surge, with the proportion escalating from 47% of firms in 2022 to a substantial 74% in the year 2023. This heightened involvement has culminated in the administration of billions of USD via DLT platforms, encompassing the participation of more than 20 prominent global financial institutions.
Challenges and Regional Disparities
Interestingly, the predicaments faced by these corporations predominantly revolve around the implementation of the technology rather than the technology itself. The predominant obstacles frequently trace their origins to human and procedural aspects associated with the integration of novel systems. Additionally, Citi underscores the diverse strategies adopted by distinct regions worldwide in the domain of cryptocurrency adoption and regulation.
In regions such as Asia and Latin America, the central thrust has concentrated on augmenting institutional liquidity and broadening accessibility to a more expansive demographic. Conversely, Europe has displayed a robust emphasis on regulatory frameworks, exemplified by initiatives like the Markets in Crypto Assets (MiCA).
Conversely, North America has observed favorable outcomes from the tokenization of varied asset classes. Nevertheless, a consistent concern highlighted in the report pertains to the ambiguity enshrouding regulatory measures. A notable 51% of the respondents have expressed apprehensions that unclear regulations could potentially impede progress, particularly evident in North America and Europe.
Rise of Digital Currency Sector and CBDCs
Simultaneously, the digital currency sector, with a specific focus on central bank digital currencies (CBDCs), has gained remarkable traction. Presently, a staggering 87% of key stakeholders within the market anticipate the feasibility of this sector to materialize by 2026, marking a significant ascent from the preceding year’s figure of 72%.
DLT’s Resilient Growth
In an overarching perspective, the growth rate of DLT appears to outpace that of the broader cryptocurrency landscape. This divergence can be attributed to the challenges encountered by the cryptocurrency sector in recent times. To provide context, a substantial 87% of custodians are actively engaged in initiatives related to DLT and digital assets. In contrast, a mere 25% of asset owners are involved in ongoing projects, while a significant 75% of institutional investors remain uninvolved.
Transformative Potential of DLT
Citi’s comprehensive analysis concludes by underscoring the transformative capacities of DLT. Beyond experimental endeavors, this technology harbors the potential to deliver substantial value by rationalizing intricate processes. However, to harness its complete potential, corporations must commit substantial investments to restructure processes and systems comprehensively.
In the wake of unprecedented growth and multifaceted challenges, the digital assets and DLT sector presents a dynamic landscape. The Citi report underscores the shifting tide of engagement, the nuanced regional strategies, and the resilience of DLT’s trajectory. As the industry continues to evolve, stakeholders face a pivotal juncture that demands judicious decisions to navigate the complexities and capitalize on the burgeoning opportunities that digital assets and DLT offer.