2021 was a banner year for crypto with increasing retail and institutional adoption pushing Bitcoin (BTC), Ether (ETH), and other coins to new all-time highs. According to a report by Fidelity Digital Assets, 2022 could be the year of regulatory clarity for the space as well as the sovereign adoption of Bitcoin.
“Regulation and product access work hand in hand and we are hopeful that 2022 can bring about more clarity than prior years as we feel this is key to bringing a greater portion of the hundreds of trillions in traditional assets into the digital asset ecosystem,” Fidelity said in the report.
Fidelity noted that there are two opposite approaches when it comes to crypto regulations. “We saw multiple bans from China throughout the year, most notably a call to crackdown on mining in May, then a document released detailing all cryptocurrency transactions as illegal in September, and finally, another announcement in November to shut down all mining,” Fidelity wrote.
At the opposite end of the spectrum is the approach taken by E l Salvador. “The government of El Salvador took the opposite approach, becoming the first-ever sovereign nation to make bitcoin legal tender in its country (El Salvador still uses the U.S. Dollar, but all businesses must accept bitcoin as payment as well),” the company said.
However, Fidelity believes that most countries won’t go for an outright ban. “Time will certainly tell which path is more successful but given our view of digital assets, it isn't surprising that we think an outright ban will be difficult to achieve at best, and if successful, will lead to a significant loss of wealth and opportunity,” the company added.
In fact, 2022 might be the year where countries will start acquiring Bitcoin and keeping the crypto in their treasuries. This could happen if BTC’s adoption increases forcing nations to hold the crypto as a form of insurance.
“We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers,” the company explained. “Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance. In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future. We, therefore, wouldn't be surprised to see other sovereign nation-states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.”