What to watch in the crypto world in 2021

For cryptocurrency enthusiasts, the year ended in a dramatic fashion. The price of Bitcoin, the leading cryptocurrency, broke an all-time high record, rising to $28,000 at one point. Bullish investors expect it to soar further. 

Here are six developments worth looking out for in 2021. Of course, cryptocurrencies remain a volatile instrument, and a lot could change if there is a downturn.  

1. Coinbase to debut as a public company – San Francisco-based Coinbase, a leading cryptocurrency exchange in the United States, has filed for an initial public offering. With 35 million verified users in more than 100 countries, it is a mainstay in the industry. The IPO will bring mainstream recognition to the nascent crypto finance sector. Other crypto companies like eToro, an Israeli social trading platform, and ConsenSys, a developer of blockchain technology for enterprises and governments, could soon follow. 

2. More crypto indices on the way – For investors who want to directly invest in cryptocurrencies, they will soon be able to use index products, a financial instrument that offers exposure to a basket of assets. S&P Dow Jones Indices and Cboe have outlined plans to offer investors exposure to up to 550 of the top traded coins. 

3. Facebook to launch Diem – Facebook remains determined to follow through on its plans to launch its cryptocurrency, a fiat-backed stablecoin called Diem, in January. It will be regulated by Swiss financial authorities and will be accessible in a digital wallet called Novi. Facebook hopes Diem will facilitate transactions between users across technology platforms, including those outside the Facebook ecosystem. It will face a long road to regulatory acceptance, as the Diem can be marketed to a massive global userbase prompting concerns over money laundering, tax evasion and how it will affect the ability of central banks to regulate money. 

4. More central banks to follow China’s lead - In November, the People’s Bank of China conducted the second trial for the ‘digital yuan’, a form of a Central Bank Digital Currency (CBDC) leveraging blockchain technology. Similar plans are in the pipeline in 13 countries, with the Bahamas having already launched the ‘Sand Dollar’. However, it could take years for widespread usage given technological limitations, as it is said to be difficult for state-controlled ledgers to track millions of transactions. Both Diem and CBDCs could lessen the appeal of cryptocurrencies.