Bonus Theme: Crypto-Philanthropy in 2022

2022 Snapshots Bonus Theme: Crypto-Philanthropy in 2022

▪ Crypto-philanthropy has become increasingly popular among digital asset investors who have benefitted from wealth creation.

▪ The advantages of crypto-philanthropy, such as transparency and costeffectiveness, differentiate it from traditional means of donations.

▪ Crypto-philanthropy has been gaining momentum in North America. Innovations such as charity tokens and more transparent regulations could drive global market adoption.

885mn

Total BTC donated in 2021 (in USD)

Core thesis

“Crypto-philanthropy” is poised for further growth and will exist alongside traditional philanthropy in 2022 and beyond. Digital asset narratives have been fixated on expanding use cases and appreciation potential. With the tremendous amount of wealth being made in digital assets and the increasing prevalence of this asset class, we believe crypto-philanthropy is a logical next step. More charities will accept bitcoin and other digital assets as donations and increasingly leverage blockchain technology for philanthropic purposes.

Significance and Disruptive Impacts

Blockchain technology helps specific pain points in traditional philanthropy, such as a lack of transparency on how donations are deployed. Innovative pilots in the emerging crypto-giving space address the issue of transparency in giving (such that donors can openly track the flow of donations) and have tax advantages.

1,017

No. of participating nonprofits in cryptophilanthropy (2021)

Expectation for 2022

1. Charity tokens to become a crypto-philanthropy channel Charity tokens help channel the donations directly to the charities without the involvement of any third party. It could increase transparency, openness and reduce transaction costs.

2. Clearer regulatory framework A clearer regulatory environment for crypto-philanthropy, especially concerning taxation treatment, could make crypto-giving more prevalent

2021– Year in Review

2021 has been a fascinating year in the digital assets space. Events like the adoption of bitcoins as legal tender by El Salvador and the record sales in NFTs have showcased digital assets are of growing popularity from the public and increasing adoption from institutions.

We look back on 2021's most significant events and breakthroughs in digital assets.

Figure 4. 2021 Key events in review

# Event

1 Global digital asset regulation

2 Web 3.0

3 Cryptocurrencies market cap reached an all-time high

Details and Significance

Countries are tightening regulations over digital assets, from stablecoin, DeFi, ETP to taxation and AML. Significance: In 2022, we will see further action to regulate digital assets. An orchestrated move will likely lead to a greater level of trust in the broader digital asset ecosystem over time.

Web3 and the concept of decentralization will fuel our future interactions on the internet. They will be interoperable, seamlessly integrated and automated through smart contracts. Significance: 2022 will see a significant inflow of investments to support blockchain projects and implementation in online interactions, data, privacy, and finances.

Bitcoin price reached an all-time high of over US$68,000, and the total crypto market cap hit $3 tr in Nov 2021. Significance: In 2022, digital assets will continue their massive growth and volatility as major institutional investors and companies provide backing.

4 El Salvador accept bitcoin as legal tender

5 Companies make forays into digital assets In Sept 2021, El Salvador became the first country to officially accept Bitcoin as a means of exchange for goods and services. Significance: The move confirms the value of bitcoin as a means of exchange and raises the possibility of more countries adopting Bitcoin as a national currency in 2022.

Corporates are getting involved in digital assets, including (1) purchasing bitcoin as reserves (MicroStrategy), (2) investing in metaverse developments (Meta, Nike); (3) advisory services (Visa); (4) crypto payment acceptance (PayPal, Venmo)

Significance: 2022 will see additional financial and technical activity driven by increasing institutional adoption and developer activity growth.

6 DeFi 2.0 DeFi 2.0 refers to a layer of applications built upon the first generation of the protocol to solve issues of scalability, security, centralization, liquidity etc.

Significance: 2022 will see further DeFi 2.0 projects take off. These projects will further democratize finance without compromising on risk.

7 Blockchain games The popularity of play-to-earn games was propelled by the concept of gamers' true ownership of digital assets. The number of gaming-related crypto wallets in 3Q21 increased by 25-fold vs the start of 2021.

Significance: 2022 will likely see further growth in blockchain games and innovations such as gaming DAOs.

8 China's crypto ban China's central bank announced in Sept 2021 that all crypto transactions are illegal. Crypto mining was one of the heaviest hit verticals. Before May, China accounted for over half of the global hashrate.

9 Meteoric rise in NFT and metaverse Significance: 2022 will see further movement from other jurisdictions to regulate digital assets. None of them will likely result in a blanket ban.

NFTs saw record-breaking sales and exposure in 2021. Fortune 500 companies are increasingly incorporating NFTs and metaverse in their strategies.

Significance: 2022 will likely see broader adoption of NFT and metaverse by companies and consumers alike, driven by the increasing uses cases and maturity of the infrastructure layer.

10 Eth 2.0 upgrade The ongoing Ethereum 2.0 upgrade will address significant issues, i.e. scalability, high gas fees, network congestion and transfer from proof-ofwork consensus mechanism to proof-of-stake.

11 Central Bank Digital Currencies Significance: 2022 will likely see the completion of the set of interconnected upgrades, which will make Ethereum more scalable, secure and sustainable.

Together with Bank for International Settlements, several central banks worldwide are exploring central bank digital currencies (CBDCs) for the public.

12 Bitcoin-linked ETF launch Significance: 2022 will see concrete steps from central banks to see how they can leverage CBDC to deliver their public policy objectives. People's Bank of China aims to launch the digital yuan fully in Feb 2022. In Oct 2021, the ProShares Bitcoin Strategy exchange-traded fund went live and became the first bitcoin futures-linked ETF to trade in the US. The ETF launch attracted a record amount of institutional capital and propelled bitcoin to an ATH.

Significance: The US ETF launch is a significant step towards institutionalization and recognition as an asset class. 2022 will see wider institutional adoption of digital assets.

Source: EmergentX

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