- The Cryptoeconomy will strongly increase its impact on the global financial system
- The Ripple Effect, the ISO 20022 standard, BTC as a central bank reserve, and ETFs are key factors to understand how cryptocurrencies will interact with the rest of the global financial system.
The financial ecosystem is undergoing an unprecedented revolution, which seemed unthinkable just a few years ago, driven by the evolution of the cryptocurrency market, led by the unstoppable growth of Bitcoin, which, at the time of this edition, surpassed $106,000.
The strong advance was fueled by several factors, including the expectation that the United States will implement a strategic digital asset reserve, similar to its oil reserves. The inclusion of MicroStrategy in the Nasdaq 100 index also contributed.
Below, we present an analysis of five key factors that will shape this new dynamic, along with their impact and integration into the financial system and the global economy.
“The ‘Ripple Effect’
The RLUSD digital asset, a stablecoin from Ripple Labs, has just entered the market. The so-called ‘Ripple Effect’ refers to the transformative potential this recent launch could have on the global economy.
The regulatory approval from the New York Department of Financial Services has been a key factor in the RLUSD launch, as it ensures that the stablecoin complies with the compliance and transparency standards required by a mature and predictable market.
In this initial stage, the coin, which has a 1:1 parity with the U.S. dollar, will be available on 5 cryptocurrency exchanges. It will be backed by U.S. dollar deposits, U.S. government bonds, and cash equivalents to ensure the stability and liquidity of the asset. Additionally, the company has stated that in order to guarantee transparency, they will publish monthly third-party audits of the stablecoin’s reserve assets, conducted by an independent firm. This asset is poised to compete with well-established ones, such as Tether’s USDT.
RLUSD will facilitate the management of fast and efficient cross-border payments, offering an alternative to costly traditional payment systems. As a stablecoin, and not being volatile, it can be used in commercial transactions.
Furthermore, Ripple is driving the tokenization of assets by enabling the creation of non-fungible tokens (NFTs) on its ledger. This initiative democratizes the ownership of assets such as real estate and digital art, improving liquidity and lowering barriers to entry for businesses and users. XRP—the native cryptocurrency of Ripple—is in the midst of a bull run, fueled by the announcement of the official launch of the RLUSD stablecoin.”
“Bitcoin: The New Gold for Store of Value?”
No central bank can block Bitcoin transactions. No foreign government can freeze Bitcoin assets. No international organization can limit Bitcoin transfers. With these arguments, a Forbes columnist anticipated the upcoming discussion: Should Bitcoin be a reserve currency for national treasuries?
In favor of this option, it is argued that any nation could store and transfer billions without relying on foreign banks, clearing systems, or physical vaults, achieving financial sovereignty that traditional assets like gold or fiat currencies do not provide. Smaller nations could benefit, mitigating risks such as inflation and devaluation.
On the other hand, transferring one billion dollars in Bitcoin costs less than $100 in fees (compared to the 0.5-1% fee charged for transferring gold). Some banks have already developed secure methods to handle large amounts of Bitcoin.”
“The ISO 20022 Standard”
Cryptocurrencies were created outside of the prevailing financial system. However, at this moment, the banking sector is advancing to integrate these assets. To achieve this goal, the ISO 20022 standard is crucial, as it is a protocol designed to replace the SWIFT system and improve communication between financial institutions. The global adoption of this technology is expected to be complete before 2030.
ISO 20022 is a financial messaging standard designed to provide a secure and standardized way for organizations to exchange financial information.
A key issue that ISO 20022 aims to address is the lack of digital token identifiers (DTIs), which are essential for distinguishing between different digital currencies. Unlike fiat currencies, cryptocurrencies lack universally recognized identifiers, making them difficult for banks to process. The 8 main cryptocurrencies currently compatible with ISO-20022 are: XRP, Stellar Lumens, XDC Network, Algorand, Iota, Hedera Hashgraph, Quant, and Cardano.
“Staking: Another Use Case”
The expansion of Bitcoin inspired the creation of Ethereum, other protocols, and tokens, and cryptocurrencies began to be used for cross-border trade and remittances. However, crypto staking is another use case that will play an increasingly prominent role.
Crypto staking is a market with two sides. On one hand, there are the holders of BTC, the providers, who earn staking rewards in exchange for offering their assets to secure PoS chains. On the other hand, there are PoS protocols that benefit from the increased security that results from the higher capital staked as part of the transaction validation process, which is essential for the long-term viability of the network.
In addition to benefiting retail users by allowing them to earn passive rewards with their BTC holdings, Bitcoin staking offers a very attractive opportunity for businesses and governments. Small nations like Bhutan have become significant players in the Bitcoin space, ranking fourth in government Bitcoin holdings, behind the UK’s reserves.
Rather than keeping Bitcoin dormant in their treasuries, institutions and governments can put these assets to work through Bitcoin staking. The enormous opportunity that staking offers is to transform BTC into a store of value and a medium of exchange that also generates profits.
“The Rise of Crypto ETFs”
2025 will bring many approvals for ETFs (exchange-traded funds) focused on cryptocurrencies. This is what Bloomberg analysts are anticipating. These regulated financial products offer investors new options to gain exposure to digital assets such as Bitcoin, Ethereum, or Litecoin.
So far in 2024, cryptocurrency ETFs have attracted $28 billion, with much of their growth driven by the increase in Bitcoin’s price, which has risen 105% this year. This surge has generated significant returns for cryptocurrency ETFs.
In summary, the path of institutional adoption and the regulated activity of cryptocurrencies are the core of this new era of growth and expansion, the future effects of which we are only beginning to glimpse.