Guest post by: Jackie Berleen
2020 may not have been a good year for many sectors, but crypto adoption ramped up.
The crypto adoption upswing can be attributed to a number of factors, including some exciting Bitcoin bull runs, the halving that happened in May, the emerging popularity of DeFi and increasing interest among corporations like Goldman Sachs.
These developments provided quite a few adoption catalysts, and got many movers and shakers within the crypto space excited. It has gotten to the point that Binance US CEO Catherine Colley even predicted that 2020 could be the year that crypto goes mainstream. However, even with all these exciting developments, the crypto industry is still experiencing a slowdown in terms of growth. Reports predict that the pandemic will shrink the global market from $2.45 billion to $2.27 billion, which is a significant decrease from what was initially forecasted.
Will that downward trend continue or will 2021 bring steadier growth patterns?
Here are some of the challenges and opportunities of crypto adoption in 2021.
Ramping up crypto adoption
At this point, crypto should have already gone mainstream, but there are several significant barriers that are making adoption challenging. For one, government regulation surrounding crypto is still murky.
For another, there’s a big lack of understanding about crypto among traditional investors, the very people who can make crypto soar. This knowledge gap poses a problem for crypto exchanges.
“The biggest barrier to getting more users that actively utilize the platforms is a lack of education on how to appropriately and profitably trade and exchange in cryptocurrencies.” Nate Nead, CEO @ SEO.co
“The biggest barrier to getting more users that actively utilize the platforms is a lack of education on how to appropriately and profitably trade and exchange in cryptocurrencies,”
Nate Nead, CEO at SEO.com explained. “One of the biggest issues from the marketing side is the language we are able to use and not use to get folks on to the platform(s). Because crypto is now in a highly-regulated space, the language used in paid ads and press releases all needs to be run through legal to ensure nothing in the gray area falls between the cracks.”
Cleaning up the crypto industry’s reputation
Cryptocurrency scams and hacks tend to attract a lot of negative attention from both media outlets and government entities. These incidents cast a shadow over the industry. This shadow probably scares away many potential investors.
However, crypto exchange security has come a long way since the days of Mt. Gox. In addition, crypto exchanges aren’t always to blame for security incidents.
Crypto users can go a long way toward securing their funds by following common sense security practices, like enabling 2FA (2-Factor Authentication).
“When exchanges take quick and proactive action to rectify fund loss, it can actually rebuild that trust even stronger than before.” Manish Kataria, Co-founder and COO at Quadency, Inc.
If a scam or a hack does occur, that doesn’t necessarily spell disaster for the crypto exchanges that the incident affects.
“Even the largest exchanges fall victim to attacks, but there’s a crucial difference between scams and hacks,” said Manish Kataria, Co-founder and COO at Quadency. “
To perpetrate a scam, attackers rely on tricking users into taking certain actions; whereas getting funds stolen in a hack while you’re looking the other way creates a far higher barrier to rebuilding trust. As a multi-exchange trading platform partnered with many of the largest global exchanges, we see just how difficult that can be from the front lines. We also see that when exchanges take quick and proactive action to rectify fund loss, it can actually rebuild that trust even stronger than before.”
Game-changing crypto use cases
For the most part, crypto evolves around making and receiving payments, but 2021 may pave the way for killer apps and digital products that will cause crypto to enjoy mainstream adoption.
Crypto cashback apps like Pei, Fold, and Lolli are likely to grow even further considering the rewards they bring to customers, while crypto debit and credit cards like Crypto.com, Wirex, and others make it easier to use crypto on a day-to-day basis.
It’s also worth noting that blockchain games, including CryptoKitties, MLB Crypto Baseball, and Gods Unchained are growing in popularity, and it won’t be surprising if one or more of them goes viral soon.
Writer Daniel Ling pointed out how the likes of Bitcoin, Ethereum, and Ripple are currently the biggest coins, but that could change next year. Facebook’s Libracoin could prove to be disruptive, or a dark horse crypto project could suddenly increase in value. That’s what happened to the DeFi token YIFI, which surpassed Bitcoin in September and was trading at prices as high as $38,000.
One of the biggest reasons why crypto isn’t as big as it should be is tax rules. The US requires all crypto users to keep tabs of every single transaction they do– even buying a cup of coffee.
This is not the case in other countries, many of which are more lenient. The European island nation Malta is well-known for its ahead-of-the-curve crypto tax policies, for example.
Another issue that crypto companies face is lack of clarity on the marketing side. Some ad platforms, for example, have created restrictive policies that stop the public from learning more about cryptocurrency.
“Surprisingly, ad platform rules can be a far more difficult challenge than government oversight. Governments can be restrictive and tomorrow may be unclear, but there’s a framework to follow today.
Even then, we see exchanges playing the regulatory arbitrage game around those frameworks quite well,” Kataria explained.
“Meanwhile ad platforms regulate at their sole discretion, but there’s no Malta or Seychelles option to counter big tech’s global reach to legitimate audiences and stronghold over online marketing budgets.”
Is change on the horizon for crypto adoption in 2021?
Crypto tax policies may change soon in the US, all thanks to four congressmen who questioned IRS’ stance on staking-related income reporting.
They pointed out that staking rewards should not be taxed at the time of the receipt or discovery similar to other taxpayer-created property such as crops, minerals, livestock, and artwork.
These congressmen believe that rewards should be taxed only when they are sold. It’s unclear how their proposal would move forward, but it may just be a catalyst to regulatory reform. However, it’s worth noting that these are all just predictions. But if the right factors fall into place, we can expect 2021 to be a big year for crypto adoption.
Follow our weekly content about crypto taxes and guides:
2021’s NFT Guide (with taxes)
Is Bitcoin taxable? The ultimate guide for 2021 taxes
The Best 65 Crypto Twitter Accounts to Follow
Do you pay taxes on crypto trades?
Crypto jobs: Here’s the 5 best platforms to find them
How to report crypto in your taxes?
Bitcoin Millionaire? An inheritance plan for wealth.. with taxes
Crypto adoption made easy with CoinTracking
Trade Imports (API & CSV) from 110+ exchanges/wallets
DeFi/DEX trades imports (e.g., Uniswap) using our ETH+DEX import
Support for Binance Smart Chain trades with our BSC Importer.
Automatic Gains calculations with the choice of 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB).
Complete Tax Reports compliant in your country.
If you need personalized help reviewing your trades or preparing US tax returns, check out our CoinTracking Full Service. A team of crypto CPAs led by Sharon Yip, the expert crypto CPA who provides support for Full Service.
Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.