I am Jerald David, President of Arca Labs—Arca’s innovation division. I am responsible for the development of financial infrastructure, networks, and products for the digital age, co-innovating with like-minded companies. I have 5 predictions for digital asset innovation in 2022:
- ATSs will drive digital asset securities adoption. Digital asset securities Alternative Trading Systems (ATSs) are in their infancy, and although there is currently only a handful, there are many more undergoing the registration process. The demand for liquidity will increase the need for ATSs to support the secondary trading of these securities. New listings, combined with access to formerly untapped assets will help increase the digital asset security market cap by 3x in 2022.
- Traditional financial firms will start tokenizing. Tokenization is the evolution of all existing assets and product structures. Blue chip companies and publicly traded institutions will continue to tokenize assets in order to reduce operating costs and gain access to assets with traditionally high barriers to entry. The tokenization of real estate will be first, followed by equities, as investors seek the benefits that blockchain can deliver speed, certainty, and immutability.
- Digital asset securities will be utilized for corporate infrastructure. We have seen a movement by financial incumbents toward the utilization of blockchain technology to replace legacy infrastructure. The first experiments were distributed ledger-based, followed by transactional proof of concepts. Next, we will see the evolution of digital asset securities for settlement, liquidity management, collateral management, and other U.S. dollar proxy workflows.
- Digital asset securities will have a domino effect. It’s no surprise that publicly traded and regulated financial institutions are reluctant to participate in the digital asset ecosystem because of the perceived uncertainty. However, while they wait, more nimble private companies are gaining competitive ground. I predict the introduction of a regulatory framework, followed by the implementation of corporate innovation projects, and a flood of capital that will lead to the adoption of digital asset securities by many highly regarded companies.
- Early adopters and incumbents will converge. Over the past decade, innovation in the digital asset ecosystem has been largely driven by start-up companies and first movers. These pioneers differ vastly from their larger, older, and bigger incumbents who view blockchain as unfamiliar territory. The unlikely duo will collaborate to build products and solutions that are made possible by the competencies of each partner.
For more 2022 digital asset industry predictions from Arca leaders, visit Arca Outlook 2022.
