Some recent data on the crypto ecosystem
From the IMF’s Global Financial Report, October 2021:
- Total market value of crypto assets was under $500 billion in late 2020, but increased to $2.5 trillion in 2021;
- Bitcoin remains the dominant crypto asset, but its market share has declined sharply in 2021 from more than 70 percent to less than 45 percent;
- The size of DeFi (decentralized finance) grew from $15 billion at the end of 2020 to about $110 billion as of September 2021 largely due to the rapid growth of (1) decentralized exchanges that allow users to trade crypto assets without an intermediary and (2) credit platforms that match borrowers and lenders without the need for a credit risk evaluation of the customer. These services operate directly on blockchains (usually) without customer identification requirements.
- One innovation getting a lot of attention is “stablecoins,” which are a form of cryptocurrency that are backed by conventional and usually US-dollar-based financial assets. The figure below shows some leading stablecoins and the financial asset behind them.
On September 24, China’s central bank and its National Development and Reform Commission issued two documents: One outlawed cryptocurrency mining following an earlier crackdown in May, and the other declared all cryptocurrency transactions illegal and all companies providing cryptocurrency trading services to Chinese citizens as engaged in illicit financial activity. As the majority of crypto activity is in China, this new development could be a serious blow to the crypto ecosystem.
The crypto ecosystem and financial stability challenges
From: IMF
Cryptos are becoming very popular in Africa
[T]he simplification and cost-competitiveness of sending and receiving money with cryptocurrency will fuel continued growth of digital currency utilization in the region. Alongside the use of cryptocurrencies as a medium of exchange, stablecoins, a cryptocurrency variant whose value remains stable by pegging its price 1:1 with the U.S. dollar, offers Africans facing unstable currencies an alternative outlet in which to save money without the anxiety of devaluation.
Cryptocurrency flows in Africa
By: Leo Holtz – Brookings
