2017 will be remembered for bitcoin price reaching $20 000 milestone, the growth of the cryptomarket capitalization up to $570 bln, and the record-breaking ICO campaigns. According to CoinSchedule, 235 projects held ICOs for a total of $3 700 000 000 in 2017. At the same time, the amount raised by the 10 largest crowdsales in 2017 totaled $1 360 000 000.
The Telegraph journalists presented the first billionaires who made a fortune on cryptocurrency to the public: Tyler and Cameron Winklevoss, the twins famous for suing Mark Zuckerberg for Facebook rights ownership. The case was settled with a $65 000 000 payout in a pre-trial agreement. Back in 2013, the Winklevoss brothers had purchased bitcoins worth $11 000 000. At the time, the cryptocurrency was worth about $120 per coin. As of January 1, 2018, the price of bitcoin was $13 800.
So far, there is no unambiguous opinion about the fate of the most popular cryptocurrency – Bitcoin. Jeffrey Sachs, the American economist, calls the cryptocurrency “a bubble”, while Pavel Matveyev, the co-founder of the Wirex blockchain payment service, believes that we will see bitcoin price risштп again to $20 000 per coin in January 2018, and then hitting $50 000 000 milestone by the end of the year.
So what are we to expect in the coming year?
Legislative regulation of ICO and cryptocurrencies
The Russian Ministry of Finance is going to submit a bill on cryptocurrencies to the State Duma in February. The Ministry of Finance will have to resolve the issue with the Central Bank, which is not going to support cryptocurrency trading. The Central Bank is against legalizing cryptocurrencies and points to the dangers of uncontrolled market growth, seeing it as a threat to the global economy. Therefore, the Ministry is looking for another trading platform that will agree to perform cryptotrading functions.
The government is also considering the issues of ICO regulation. The draft law that the Minisry of Finance is going to issue will regard fundraising campaign as a kind of crowdinvesting, and the received cryptocurrencies and tokens will be considered as another kind of property.
Authorities of Udmurtia proposed a means of regulating cryptocurrencies at the regional level. In particular, the government of this region of the Russian Federation decided to create a blockchain technology center. It will be located in Sarapul. Mining farms will operate on the basis of the center. They are expecting to attract investors to the region through the legalization of cryptocurrencies and mining. The plan for the blockchain valley creation was included into the 17-year development plan for the Russian single-industry towns.
At the post-Soviet space, Belarus became an example of a positive attitude towards cryptocurrencies. President Alexander Lukashenko officially permitted mining, holding, selling and purchasing tokens through signing relevant decree. Activities involving cryptocurrencies are not considered entrepreneurial in Belorussia, and tax privileges are provided for miners and brokers in terms of exemption from income tax, VAT, simplified tax and personal income tax.
The EU member states decided to regulate the cryptocurrency market by prohibiting anonymous transfers. In order to be able to comply with this rule, trading platforms must identify their users. The EU authorities will have to adapt the new rules to local legislation within a year and a half. Some representatives of the European financial organizations are oppose the legislative support of cryptocurrencies. For example, Carl-Ludwig Thiele, the member of the Board of Directors of the Bundesbank, has ruled out the possibility of legalizing cryptocurrencies in the EU entirely.
The countries will have to decide on their strategy regarding the cryptocurrencies in 2018. Some of them will insist on banning them altogether because they could be used in criminal operations. However, the “black market” players also use cash, but nobody is going to ban it. The countries that refuse to follow the path of forcing complete ban on cryptocurrencies will prepare a legal basis allowing for integrating them into their economy. The authorities can no longer ignore the cryptocurrency market as its capitalization now exceeds $455 000 000 000, according to CoinMarketCap, as of January 17, 2018.
CryptoRuble remains a concept that the Russian authorities are still holding off on implementing. At the meeting dedicated to the challenges posed by the cryptocurrencies, held on 10 October 2017, the Russian President Vladimir Putin noted the need to control the CryptoRuble issuance, though avoiding the creation of unnecessary barriers in the field at the same time. The representatives of the Central Bank of Russia have so far spoken out against the cryptoruble. For example, on December 28, 2017, Olga Skorobogatova, the First Deputy Chairman of the Central Bank, came up with the statement that the introduction of a digital national currency is not advisable. On January 17, 2018, Sergey Shvetsov, the First Deputy Chairman of the Central Bank of Russia expressed the view that there was no demand for a cryptoruble. If controlled by the state, the CryptoRuble will not become decentralized and anonymous. This currency cannot be mined. This means that CryptoRuble cannot be regarded as cryptocurrency proper.
January 2018 has seen the Venezuelan President Nicholas Maduro announcing the release of 100 000 000 coins of El Petro cryptocurrency. This cryptocurrency is secured by Venezuelan oil. The initial price of one El Petro will be equal to the price of one barrel of oil. El Petro cannot be mined: all coins will be held by the state. So far, the deputies of the Venezuelan Parliament do not support their president and are opposed to the national cryptocurrency.
The Bank of England has announced the plans for coining a cryptocurrency of its own. English crypto coin will likely be tied to the pound sterling. It is supposed to be named RSCoin.
Ukraine is also expected to coin its own cryptocurrency. The possibility of such a move was announced at the National Security and Defense Council meeting.
One can expect other statements about state cryptocurrencies in 2018. However, their release is still unlikely. The authorities are unlikely to proceed much further than talks and draft laws on the matter.
Introducing cryptocurrency into everyday life
One of the limiting factors in the cryptocurrency development is the complexity of its everyday use. Mark Zuckerberg announced the possibility of using cryptocurrency on Facebook. The social network founder mentioned that he was impressed by the opportunity to transfer State power back to people through cryptocurrency and encryption.
The possibility of introducing cryptocurrency into the popular Japanese instant messenger Line, which uses the Line Pay payment system, is also under consideration. The messenger is used by 168 000 000 people each month.
KFC fast food chain organized a burgers for bitcoins promo action in Canada. To do this, Customers were to transfer an amount worth 20 Canadian dollars in bitcoins via the BitPay platform to get their orders delivered to their doorsteps.
However, the settling of everyday practice of cryptocurrency usage may be hindered by the restrictive actions posed by law enforcement agencies and traditional payment systems. For example, the Krasnoyarsk prosecutor’s office demanded that the local Bentley showroom desists from car sales for bitcoins. The prosecutors did not appreciate the bitcoin vending machines installed in Kazan either.
Visa blocked the WaveCrest project debit cards that allowed to purchase everyday goods for cryptocurrency early in January 2018. The payment system claimed that this happened due to the violation of contractual rules by WaveCrest.
Startups will continue solving the problem of cryptocurrency daily use. One can expect the emergence of new products such as bank cards and apps that will allow cryptocurrency payments. Companies will offer products for bitcoins in the course of their PR campaigns in 2018, but one shouldn’t expect a total transition to cryptocurrencies.
Cryptocurrency mining and payment infrastructure
Businessmen have already responded to the market need for cryptocurrency mining infrastructure development. The companies specializing in selling power supply stations for mining have already emerged, many of them in Russia. Aleksey Kolesnik, the ex-head of the Committee of Natural Resources of Tatarstan, bought a power station from T-Plus, without prejudice to the option of using it for cryptocurrency mining power supply.
Landlords started offering premises for cryptocurrency mining in Novosibirsk. Thus, miners may now spare their housemates and neighbors from exposure to high temperatures and noise. Alexei Noskov, the head of the Xelent Mining data center project, believes that the time is ripe for emergence of mining hotels where private miners could station their mining farms.
Cryptocurrency-related payment infrastructure is also being finalized. For example, the Monaco project is going to issue Visa cards supporting payments in cryptocurrencies. Cryptocurrency may be bought, sold and exchanged via a mobile app. Besides, the project has its own tokens granted to customers for financial transactions. The project has held the ICO, which resulted in raising ETH 71 392 worth $25 000 000, as of 18 June 2017.
Projects that develop the payment infrastructure continue launching ICOs. According to the ICObench tracker, 12 projects in the Retail category announced ICO launches in December 2017. For example, the INS startup has presented a draft of a blockchain platform allowing its users to purchase food products directly from the producers.
VISO ICO project has offered a payment infrastructure that includes POS terminals, bank cards tied to cryptocurrency, e-wallets, internal exchange, and a platform for online store creation. VISO is an example of a project allowing for both making and receiving cryptocurrency payments.
The Coinmap service shows the locations on the world map where cryptocurrencies are accepted. Related data is shared by the users and the outlet owners. So far, Japan, China and the US are leading in the number of such locations.
Beneficial business niches will still be open for businessmen in 2018. The demand will be used for free electric power, areas for mining, and payment services with cryptocurrency support.
Changes in the ICO market
The investors gradually become more and more disappointed by the ICO. In the US, the PlexCoin startup founders were accused of fraud, and the raised funds were blocked. The investors into the Confido project lost $375 000 after its founder had deleted all the project data and fled. The founder of the Fantasy Market project had also disappeared with $4 400 000 worth of raised funds.
Major players started showing interest in the ICO. Kodak, the manufacturer of photographic equipment and supplies, announced the creation of the KODAKOne blockchain platform, which will help to secure photo copyrights. The project is expected to launch the ICO on January 31, 2018.
Telegram also showed interest in this method of fundraising. Its founders have announced the Telegram Open Network platform (TON), a new generation blockchain project, as the related White Paper reads. TON will become a platform for apps and smart contracts, as well as a blockchain-based payment infrastructure. The project-related ICO is expected in March 2018.
Mikhail Brusov, the co-founder of Cindicator, believes that despite growing in numbers continuously, new ICOs will have to fight for investors. Since the supply exceeds the demand, the projects will be forced to show transparent rules of the game while offering the opportunity to participate in the ICO. Dmitry Matsuk, the Blockchain.ru Group founder, thinks that the ICO participants will tend to publish their incomes and spendings, backed up by reliable team members’ details, roadmaps and reports on the project development milestones in order to improve market transparency. At the same time, sticky-fingered market participants should be charged with criminal or administrative offenses.
ICO will remain a popular opportunity for new projects, allowing them to raise funds from investors. But there will be fewer and fewer record-breaking ICOs. At the same time, investors will be more cautious and look for transparent projects to participate in, rather than investing indiscriminately. Moreover, the ICO popularity will decrease with the infrastructure development for daily cryptocurrency use. Investors previously invested their cryptoassets in crowdsales, because the possibilities for daily cryptocurrency use are significantly limited.
What does it all mean
Trends indicate that cryptocurrencies are now recognized by the world community and are passing through the stages of growing pains. Whereas previously the authorities were simply ignoring this market, now they either ban cryptocurrencies or try to legalize them.
Users are more careful with investments now and tend to invest more wisely. 2018 will be a decisive year. If cryptocurrencies prove their safety and usability, they will be accepted not only by enthusiasts and venture investors, but also by the governments, commercial organizations and common consumers, though within certain rules and regulations.
By Egor Petukhovsky, co-founder of the VISO payment system for cryptocurrency and fiat payments