Crypto Adoption in 2023

2023 witnessed global crypto adoption growth, with major regulatory, institutional, and market developments shaping the industry.

2023 marked a year of significant growth and diversification in the cryptocurrency sector, witnessing its increasing adoption across various global markets and industries. This article provides a detailed examination of the pivotal events and trends that shaped the crypto landscape over the year.

Asia’s Growing Embrace of Cryptocurrency

In Asia, India, Vietnam, and Thailand led the charge in grassroots cryptocurrency adoption, as identified in the Chainalysis’ “2023 Global Crypto Adoption Index.” Despite the downturn in 2022 following the FTX collapse, these lower middle-income countries showcased a strong recovery, with adoption rates surpassing those seen during the 2021 bull run.

India, in particular, emerged as a crypto leader, not only in grassroots adoption but also as the second-largest global crypto market by transaction volume. The country’s innovative approach to crypto transactions included a 1% tax deducted at source on cryptocurrency transactions.

Legislative and Regulatory Developments

Throughout 2023, over 40 countries were actively shaping regulations and laws concerning cryptocurrencies. According to a PwC report, these efforts focused primarily on four areas: stablecoin regulation, adherence to the Financial Action Task Force’s Travel Rule, licensing and registration requirements, and developing comprehensive crypto regulatory frameworks.

Countries varied in their regulatory engagement levels. Japan, the Bahamas, and several European Union states were notably comprehensive in their involvement, while others like Uganda, India, and Brazil took a more measured approach, focusing on specific sectors.

The Travel Rule emerged as the most widely discussed topic, with 40 out of 43 countries engaging in it. In contrast, stablecoin issuance guidelines received less attention, with only a few countries like India and Brazil addressing this issue.

A landmark development in 2023 was BlackRock’s application to the U.S. Securities and Exchange Commission for launching a Bitcoin exchange-traded fund (ETF), potentially the first of its kind in the U.S. The firm also filed for a spot Ether ETF, signaling its deepening investment in cryptocurrency.

Other Developments

Spain witnessed a substantial 56% growth in registered crypto companies. The country’s central bank’s official registry included 30 firms receiving virtual asset service provider licenses. Furthermore, these firms comprised global platforms like Revolut, Bitpanda, Crypto.com, and Vivid.

Tokenized real-world assets (RWAs) gained considerable mainstream traction in 2023. According to the Boston Consulting Group, the tokenized RWA market is projected to reach a $16 trillion valuation by the end of the decade. The real estate sector particularly benefited, with the value of on-chain real estate increasing by 102% between the first and third quarters of 2023.

Moreover, Hong Kong allowed retail investors to trade in digital assets from August 2023. The Securities and Futures Commission of Hong Kong implemented a stringent licensing regime, setting strict rules for digital asset companies to safeguard investors.

Additionally, Turkey saw its crypto user base rise by 52%, driven by economic factors like inflation and the devaluation of the Turkish lira. Bitcoin emerged as the most popular cryptocurrency among Turkish investors. Notably, there was an increase in young female investors in the country’s crypto sector.

EDX Markets, backed by financial giants like Citadel Securities and Fidelity Investments, made its debut in the crypto exchange industry in June 2023. Similarly, the Canton Network, supported by industry heavyweights such as BNP Paribas and Goldman Sachs, was launched, aiming to synchronize financial markets.

Lastly, several major German financial institutions, including Deutsche WertpapierService Bank (Dwpbank) and DZ Bank, ventured into the crypto space by launching their own digital asset platforms. This move opened the door to a wider network of banks and institutional clients for crypto services in Germany.