Coinbase’s State of Crypto report: Here’s what we learned

A staggering 86% of Fortune 500 executives believe tokenization could be valuable to their companies, and The State of Crypto report says they are also bullish on stablecoins.

Coinbase’s latest State of Crypto report is out and, as always, it makes for interesting reading.

The exchange’s research showed a bullish bias, noting that ETFs based on Bitcoin’s U.S. spot price have eliminated “significant pent-up demand” by allowing investors to gain exposure to the world’s largest cryptocurrency. Assets managed in these funds currently stand at $63 billion, and Coinbase predicts a healthy appetite for Ether ETFs if given the green light by the U.S. Securities and Exchange Commission.

Beyond that, the focus of Coinbase’s report was not the vibrant recovery in crypto markets but the high level of enthusiasm for on-chain projects seen among some of America’s largest companies.

Data shows that the number of on-chain projects among Fortune 100 companies has increased by 39% in the last 12 months. What’s more, 56% of executives at Fortune 500 companies say they are now experimenting and making improvements using this technology; For some, “consumer-facing payment apps” are an urgent priority. They’re not afraid to spend some money either, with the typical on-chain project having a budget of $9.5 million.

Source: Coinbase

According to Coinbase, there are a wide range of benefits of stablecoins and tokenization that entrepreneurs find attractive.

When it comes to digital assets pegged to the US dollar, the biggest advantage Fortune 500 executives identified was the possibility of instant payments. There is also optimism that accepting stablecoins as a payment method could help reduce fees for merchants with very low profit margins; but this isn’t always a given, given the scalability concerns known to plague large blockchains. Instant cross-border payments were also on the list, along with faster transfers within a business.

The report also highlights how tokenization of real-world assets has the potential to transform the global economy in the coming years. Here, key benefits and use cases that appeal to senior executives include shorter processing times, operational efficiencies, greater transparency, streamlined regulatory processes, and the ability to bring loyalty programs into the 21st century; This increases interaction between target audiences. Coinbase included figures showing that the value of tokenized assets could reach $16 trillion by the beginning of the next decade. Showing how important this is, the stock market pointed out that this is equivalent to the GDP of the European Union.

Tokenization in action

To borrow a frequently used crypto phrase here, we are “still early birds” when it comes to seeing how the tokenization push will play out. Many potential use cases have yet to emerge. However, one of the companies with big goals here is Mastercard.

Earlier this week, the payments giant announced that it was trying to significantly modernize the world of e-commerce, ultimately making the need to type in long credit card numbers when buying something online a thing of the past.

This is more than just saving shoppers some time at the checkout; because this approach could be a magic solution in the fight against fraud. Artificial intelligence and the growing demand for e-commerce in emerging markets have led to an increase in the value of fraudulent and illegal transactions conducted online. Mastercard cited figures from Juniper Research showing that merchants worldwide will lose $362 billion between 2023 and 2028.

In practice, Mastercard wants to invalidate the 16 digits on payment cards by replacing them with a secure token. The company believes tokenization also has the potential to turn smartphones and cars into “commerce devices”; This is based on the huge progress made in contactless payments.

As part of the company’s plans, e-commerce will be 100% tokenized in Europe by 2030. Valerie Nowak, executive vice president of Mastercard, calls it a “win-win-win for shoppers, retailers and card issuers.”

“We have seen tokenization gain momentum across the ecosystem in Europe, with its ease and low fraud rates selling for itself.”

Valerie Nowak

Back to Coinbase and its report noted that on-chain government bonds have emerged as a particularly popular use case, with the value of tokenized US Treasury products now at $1.29 billion, up 1,000% since the beginning of last year.

Franklin Templeton, whose tokenized money market funds were featured as a case study in The State of Crypto, described his adoption of this technology as a necessity.

“The market infrastructure through which we issue, trade, and wrap assets into portfolios is 50 years old… We are starting to see that there are ways to improve this tremendously in blockchain technologies. “There are ways to reduce transaction times, get more real-time information, and enable 24/7/365 trading because we live in a global world where our businesses operate 24 hours a day.”

Sandy Kaull, head of digital assets at Franklin Templeton

Overall, the report shows that 86% of Fortune 500 executives believe tokenization could be valuable to their operations; This is an important figure.

The power of stablecoins

Elsewhere, Coinbase said stablecoins are playing an increasingly larger role in the global economy, with daily stablecoin transfer volumes breaking records in the first quarter of this year, reaching $150 billion. Of course, this exchange has some skin in the game, given that it has a stake in Circle, which issues USD Coin.

The authors of the report noted that the companies behind USDC and USDT now hold in reserves an amount of US Treasury bonds equivalent to the holdings of Norway, Saudi Arabia and South Korea combined.

This also coincided with concerted efforts to simplify the process of using stablecoins, which is especially important for consumers unfamiliar with digital assets.

“Through Circle, merchants on Stripe can now accept payments in USDC via Ethereum, Solana, and Polygon; Payments are automatically converted to fiat currency. PayPal supports cross-border transfers with no transaction fees for stablecoin users in approximately 160 countries.”

coinbase

Remittances, which enable foreign workers to send money back to their loved ones, are a particular area where stablecoins can provide faster and fairer service.

As Coinbase states, this is an $860 billion market. However, currently cross-border payments made through traditional channels often incur fees of up to 6.39%. In other words, this means hard-working consumers, their families, and local economies are missing out on close to $55 billion each year.

There was another fascinating use case in the form of a Washington DC chain called Compass Coffee. With many of its customers switching from cash to cards, the company said it was tired of paying high transaction fees (funds that could be reinvested into the business). It has now started offering stablecoins as an alternative payment method.

“Accepting crypto payments could be transformational for our business. “By accepting USDC, we hope to help transform retail experiences.”

Michael Haft, founder of Compass Coffee The challenges ahead

Although there is much to be optimistic about and interest in the crypto industry is intense, Coinbase warned that there are external factors hindering progress.

“The increased activity increases the urgency for clear rules for crypto that help keep crypto developers and other talent in the United States, deliver on the promise of better access, and enable U.S. leadership in crypto globally.”

coinbase

Citing the impact of regulatory paralysis that has caused many companies to move overseas, the exchange warned that America’s share of crypto developers has fallen by 14 percentage points since 2019; which means only 26% are based in the US

Interestingly, 55% of Fortune 500 executives surveyed said the biggest obstacle to implementing an on-chain project is a lack of reliable talent with the right skills, compared to 30% in 2023. knock-on effect in other ways. For example, 40% of survey respondents admitted that they do not fully understand how this technology works; Another 23% admitted they didn’t know how to start developing their idea.

Source: Coinbase

With crypto literacy legislation beginning to work its way through Congress and the SEC softening its stance on Bitcoin and Ether ETFs, only 34% of entrepreneurs now view regulation as a barrier; This rate is a 12 point decrease compared to the previous year.

We have already seen how digital assets have become a hotly debated issue in the upcoming presidential election; Donald Trump, who once spoke of his disdain for Bitcoin as it competes with the dollar, now declares he would like every single one of them. One of the remaining 1.3 million BTC to be mined in the US Reports show that even Joe Biden is now weighing whether to accept crypto donations from supporters.

Coinbase is also stepping up its efforts to advocate for the industry and provide its customers with the resources they need to make their voices heard.

After a tumultuous few years, there are only three words to describe the state of crypto right now: impressive comeback.