State of Crypto 2023: The maturing payment rail for Embedded Finance

As we reach the mid-point of 2023, the state of the cryptocurrency industry can be described as precarious at best. The sentiment for the first half of the year has been overall heavy, the result of a series of unfortunate events including crypto-friendly banks deplatforming companies, the closure of major crypto networks like SigNet and SEN, and the still-resonating repercussions of the Luna, Celsius, and FTX events of 2022.

Yet, in the face of these challenges, there remains a strong undercurrent of resilience and innovation. This resilience, however, is being tempered with caution and, for some, a healthy dose of pessimism. We're experiencing a low in the crypto market but it’s a low that, in retrospect, might be viewed as a catalyst for future growth and transformation.

The reversal of many crypto-friendly banks is indicative of the increased risk and scrutiny associated with crypto dealings. Fears of regulatory repercussions, increased money laundering concerns, and economic instability have all contributed to the change of heart. The closure of SigNet and SEN, networks that many crypto companies relied on, has added another layer of complexity and challenge.

The events involving Luna, Celsius, and FTX in 2022 brought to light the vulnerability of the crypto ecosystem. These instances not only highlighted the risks of market volatility but also underscored the need for better operational resilience and enhanced risk management processes within the crypto space.

Adding to the strain, the US government and its regulatory bodies are taking a harder stance on cryptocurrencies. The narrative around the need for more stringent regulations and measures to curb potential misuse of these digital assets is strengthening. Yet, it is in this climate of increased regulatory scrutiny that we can see the silver lining.

The pressure from regulators is forcing the industry to mature. With enhanced oversight, the crypto landscape will have to innovate while being compliant. This scenario, albeit challenging, will inevitably lead to the birth of more robust and reliable crypto practices and infrastructures.

This is where embedded finance could emerge as the saving grace. With its promise of integrating financial services directly into non-financial applications, embedded finance could redefine the crypto space. The opportunity to have banking, payments, and insurance services directly within crypto platforms could enable a new level of accessibility and convenience, thus driving adoption and usability.

While the state of crypto in 2023 may seem defined by the more negative aspects, it is important to remember that the greatest innovations often emerge from the most pressing challenges. What we're witnessing now is a reformation, a period of deep introspection and transformation within the crypto industry. At the same time, the core blockchain scalability and privacy issues continue to be solved by the many networks and development teams.

Ultimately, the increased regulation, the closure of significant networks, and the changes in stance from crypto-friendly banks are not the end of cryptocurrencies but rather an inflection point. The coming years will likely see a new phase in the crypto industry marked by increased resilience through a larger crypto market capitalization, global adoption maturity, and expanded innovation. Cryptocurrencies, rather than disappearing, may just end up becoming more embedded in our financial systems than we could have ever imagined. This includes NFTs for use cases like decentralised identification... but that’s another post in itself!

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