The crypto-asset market is headed for the Bitcoin halving that is scheduled to take place next year, and is expected to experience its first global recession. Also, that market is expecting stricter regulation, Stipe Plejić, executive director and co-founder of the StoneBlock association, pointed out for Bloomberg Adria.
StoneBlock is a blockchain association whose team includes, in addition to Plejić, Ivan Perić and lawyers Denis Kulušić, Ivan Čizmić and Milan Mašanović. We met this association at the end of December at a panel on the regulation of crypto assets at the Faculty of Law in Split, and on this occasion we talked about the previous year, regulations and what can be expected in the year ahead.
Can you introduce the StoneBlock association?
StoneBlock is a community that gathers blockchain enthusiasts and professionals whose goal is to study the application of blockchain technology and educate the business and general public.
What is the guiding idea behind StoneBlock? What are your goals?
As I have already stated, we want to convey all the possibilities and advantages of technology to the public, but also to the business community. The first part of the activity relates to educating the blockchain community, and the second part to the Blockchain Hub, where we help other projects and startups find a concept, market, users and financial resources in the web3 area, but also in IT in general.
What is your position regarding the MiCA regulation?
Regulation is necessary in order to know clear rules within the industry, but again it must not be too rigorous in order for the industry to develop. With every regulation, including this one, it is important to strike a good balance. All companies, as well as individuals, need regulation so that the area in which they work has rules and frameworks that can guide them in business and a legal framework within which they can do business. Take the practical example that your business deals with some form of crypto asset management, and the legislator is not even familiar with the term, let alone the treatment of such form of asset. Such treatment, i.e. regulatory vagueness, can drive many good ideas and projects away from such a market. Fear of an unclear legal framework can lead to such a business idea never being realized, and it could have been a product that would help and contribute in some segment of life or business. Also, it is important to protect industry users from various dangers and frauds that can appear in a young and unregulated market. If the term of which property is not clearly defined, it is difficult to apply the appropriate legal framework.
The panel that we organized with the Faculty of Law in Split, dean Ratko Brnabić and holder of the cryptoproperty chair, Matko Pajčić, went well and aroused great interest from legal experts and those interested in the legal framework of cryptoproperty. It is essential to hold such panels and discussions in order to inform the professional public, but also to discuss some ambiguities or omissions in the regulation and to supplement these rules in order to make them more effective later in the discussion with the regulators.
StoneBlock on a panel at the Faculty of Law in Split in December 2022
Where do you see the concrete application of blockchain in the times ahead and how do you view Web 3.0. technology?
The Web3 area is based on blockchain technology, that is, on the so-called digital record, and is not yet in the mainstream, quite the opposite. According to Crypto.com research, the total number of users of blockchain technology and cryptoassets in December 2022 reached 425 million, which would be somewhere around five percent of the world’s population. Accordingly, we are still in the initial phase, i.e. in the field of innovation, where the best and most efficient solutions are sought. Companies that succeed will surely be future unicorns.
The specificity of web1 and web2 is that we consumed and exchanged information there, and in web3 we can consume and exchange various forms of property without the mediation of a centralized organization such as banks, brokerage or auction houses and various forms of mediation. Following on from the above, I see the use of web3 technology in all business branches and all forms of property, from licensing to logistics and distribution business, decentralized finance, the so-called DeFi segment, financial institutions and fintech, all the way to the real estate market, ticketing, the art market, in fact of all goods that can be exchanged. At some point, when the infrastructure of the web3 market is ready, we will all have our assets in our digital wallets. The concept of digital ownership is something brought to us by web3 and it will be discussed more and more, it will be worked on and we will consume various forms of digital ownership.
How would you summarize the year 2022 in the blockchain world?
In 2022, the markets reached their peak in practically all economies in the world, including web3, i.e. the crypto-property market, which has so far positively correlated with traditional stock market indices that replicate the image of the market, such as S&P 500, Nasdaq, Dow and others. Then it happened the war that was the trigger for the market to slow down.
Until then, we had more than a decade of economic growth, after the collapse of the US real estate market and the collapse of the great banking giant Leman Brothers in 2007 and 2008. In March 2020, when COVID-19 started, we had a panic reaction from investors due to fears of a slowdown in the economy and ignorance of the virus, and thus the uncertainty of the development of the situation. However, it was a radical decline of several weeks and a quick recovery of the market, which in the profession we call a V-shaped recovery, so that event cannot be treated as a significant slowdown of the market, that is, a recession. In order for such a quick recovery to occur, the US Fed printed a record amount of money, the so-called quantitative easing, released it into circulation and temporarily restored optimism to the global markets, but in the long term did those same markets a disservice. The result of injecting such a large amount of money into the economy devalued money and thus later led to a high rate of inflation throughout the world and hyperinflation of certain commodities. At one time, the prices of wood, building materials, and energy grew uncontrollably, at the moment it is the price of eggs.
Crypto asset markets work in a specific way. Namely, they are led by the leader of the crypto market, which is Bitcoin and its halving, an event in which the reward for network maintainers is reduced by half. As a result, it is more difficult to find and more expensive. Every day there is less and less of it in circulation, which creates rarity and pressure on price growth. This event takes place every four years, the previous one was on May 11, 2020. At that time, the reward per confirmed block was 6.25 BTC, and the next one is scheduled for March 13, 2024, where the reward per confirmed block will decrease to 3.125 BTC.
Last year was between exactly two halvings, which means that, if the specifics of the cryptoasset market are respected, there should be a slowdown, a bear market, in that period. It was also marked by the collapse of the FTX exchange, one of the biggest investor frauds, perhaps bigger than Enron. I would also highlight Elon Musk and his first acceptance of BTC to pay for a Tesla vehicle, then later withdrawing that decision, and his constant commenting on the crypto market, which affected the price.
What can we expect in 2023?
According to all predictions, this year will be a recessionary year. Markets and indexes will reach the bottom and in some period will enter the accumulation phase, where investors will start using free capital, and most of the stakeholders, who were forced to sell what they have until now, will sell everything. The so-called nervous investors, weak hands investors, will be eliminated from the market, interest rates will stabilize and preconditions will be created for the start of a new economic cycle. The crypto-property market, as I have already stated, functions more specifically and is driven by the market leader, which is Bitcoin, and its halving, and the next one is scheduled for March 13, 2024, where the reward per confirmed block will be reduced to 3,125 BTC. In response to this event, the cryptoasset market should start its entry cycle. The only peculiarity to pay attention to is that this will be the first global recession that will also affect cryptoasset cycles, which may lead to some specifics.
How does the association view the position of centralized exchange offices, primarily in the period when many CeFi exchange offices were under a magnifying glass?
All centralized exchanges will certainly after all the events with Luna and the collapse of FTX be under the greater magnifying glass of the regulator and will have to go through stricter regulations and have criteria that they will have to meet in order to continue operating. Centralization is something we have had with the existing banking systems. Decentralization is the meaning and goal of blockchain technology, but in order for it to enter the mainstream, we must have sufficiently educated and expert users of the technology we are developing. Also, decentralization brings with it responsibility because if you lose the wallet keys, the funds are irretrievably lost. As they say in the blockchain industry: “Not your keys, not your coins. It is that simple.”
How do you view NFTs? Do you think there was unjustified hype around them?
Non fungible tokens, NFTs or in the Croatian translation irreplaceable tokens, raised a great interest of the entire industry in the previous cycle. Unlike fungible tokens, where each one is equal and has the same value (example two euro coins – whichever one you get has the same value and utility), non-fungible tokens are all different and each has its own specificity. Big companies and brands such as Nike, Adidas, Gucci, American Express have entered the NFT market and are trying to break away from the rest of the industry. In my opinion, it is no longer a question of who will enter the market, but when. Total turnover of NFTs for 2021. according to DappRadar, it was $25 billion, and the year before it was $95 million. From the figures, we can see the growth of interest in NFTs. The hype around NFTs in the previous cycle was high and many projects from this initial cycle for NFTs will have no use or utility in the future.
However, I see NFTs as a technology as something super-revolutionary and I believe that we will all be using it soon. Even proof of ownership of an apartment or real estate in the future will be in the form of NFT, as well as various other forms of ownership that will be able to be transferred as such and thus change ownership with all its characteristics, and all transactions will be recorded on the blockchain, where are irreplaceable and indestructible.
I would like to conclude this question and interview with a quote from Disney CEO Bob Iger: “Our generation forgets that things don’t have to be physical. They can be digital and still mean something to people. And as long as that meaning can be fundamentally backed up in the blockchain, I think you’re going to see an explosion.” things that are created, traded and collected in NFTs.”.