Market News

• Blockchain Council
• September 02, 2024

Blockchain Devices Market to Exceed $15.69 Billion by 2031

The Blockchain devices market is set to experience substantial growth, with projections indicating it will reach $15.69 billion by 2031, up from $621.83 million in 2022. This impressive growth, driven by a compound annual growth rate (CAGR) of 43.15%, underscores the increasing adoption and integration of Blockchain technology across various industries.

Several factors are contributing to this significant market expansion. The rise in demand for banking and financial services, coupled with the growth of digital economies, especially in developing countries, plays a pivotal role. The proliferation of Wi-Fi, Bluetooth, smartphones, and the internet further fuels this growth, as these technologies facilitate easier access to Blockchain applications. Additionally, the increasing recognition of Blockchain’s benefits, such as enhanced transparency and security in financial transactions, is prompting more industries to adopt this technology.

The cost of developing research and development skills in Blockchain technology is also on the rise, contributing to market growth. Companies are investing heavily in enhancing their Blockchain capabilities to stay competitive. Moreover, continuous improvements in Blockchain technology are making it more robust and versatile, attracting more businesses to integrate it into their operations.

However, the market faces several challenges that could impede its growth. High R&D costs and strict regulatory frameworks in emerging economies create barriers to entry for smaller players. Additionally, uncertainties regarding Blockchain technology’s long-term viability and regulatory compliance pose significant challenges. Issues related to security, privacy, and industry-specific restrictions also complicate the widespread adoption of Blockchain technology.

Despite these challenges, the market’s potential remains vast. By 2022, the public cloud segment dominated the market, accounting for over 61% of global revenues. Public cloud providers offer scalable and cost-effective solutions for implementing Blockchain, making it easier for businesses to manage growing transaction volumes. These providers have also invested heavily in security and compliance, which is crucial for Blockchain applications in sensitive areas like finance and healthcare.

The private cloud segment is expected to see significant growth over the forecast period. Private cloud services offer dedicated resources to organizations, making them an attractive option for enterprises looking to migrate services to cost-effective infrastructure. The growing adoption of private cloud by large enterprises and SMEs is driving this segment’s growth.

In terms of applications, the payments segment dominated the market in 2022, accounting for over 44% of global revenues. Blockchain technology streamlines payment processes, reduces operational costs, and enhances transparency, making it increasingly popular for payment solutions. The reduction of intermediaries in the payment process also contributes to the growth of this segment.

Regionally, North America dominated the global Blockchain devices market in 2022, accounting for over 37% of global revenue. The region’s strong ecosystem of tech startups, established companies, and research institutions fosters Blockchain development. Silicon Valley, in particular, has become a hub for Blockchain startups and venture capital investments. A diverse range of industries in North America, from finance and healthcare to supply chain management and energy, recognizes Blockchain’s transformative potential.

Asia-Pacific is expected to grow at the highest CAGR during the forecast period. Governments in countries like China, Japan, and India are promoting Blockchain technology for its transparency and efficiency benefits. In 2019, South Korea’s government announced a $880 million investment in Blockchain development projects, highlighting the region’s commitment to advancing this technology.

The competitive landscape of the Blockchain devices market includes several key players, such as IBM Corporation, Microsoft Corporation, The Linux Foundation, Blockchain Tech LTD, Chain, Circle Internet Financial, LLC, Deloitte Touche Tohmatsu Limited, Digital Asset Holdings, LLC, Global Arena Holding, Inc. (GAHC), Monax Labs, Ripple, Ledger SAS, HTC Corporation, Pundi X Labs Pte. Ltd., GENERAL BYTES S.R.O., Sikur, SIRIN LABS, SatoshiLabs, and Genesis Coin Inc.

Crypto Investors Plan to Spend $12 Billion in Blockchain Projects This Year

Venture capitalists are anticipated to pour around $12 billion into Blockchain projects in 2024. This figure highlights a shift in the investment landscape within the crypto industry, focusing more on foundational projects rather than application-specific startups.

During the last major market surge, venture capitalists heavily backed application layer startups like Coinbase. However, this year’s focus is shifting towards infrastructure projects, known as layer 1s, which support a wide range of crypto applications and networks. Robert Le, a crypto analyst at PitchBook, noted that this cycle has not seen large investments in application projects. Instead, the emphasis is on infrastructure that underpins various crypto applications and networks.

A prime example of this trend is the significant investment in Together AI, a developer of an open-sourced decentralized cloud platform. In March, the company secured $106 million in an early-stage funding round led by Salesforce Ventures. This deal underscores the growing investor interest in infrastructure projects.

In the first quarter of 2024, venture capital investments in crypto surged by 40% to reach $2.4 billion, compared to the previous period. Despite this increase, the total investment for the year is expected to rise by only 27%, reaching $12 billion from $9.4 billion in 2023. This moderate growth is attributed to the focus on infrastructure projects, which generally attract less funding compared to application-level startups.

Exchange-traded funds (ETFs) are also gaining traction among investors, with the industry hitting a record $12.7 billion in assets under management (AUM) in March, according to Brown Brothers Harriman (BBH). This shift indicates a growing preference for ETFs over individual stocks among investors.

Bank of America Securities reported that inflows into ETFs have outpaced those into single stocks year-to-date. Investors have been actively purchasing ETFs across various strategy styles, including growth, value, and blended strategies. Discretionary ETFs experienced the fifth-largest inflow since 2017, while Energy ETFs saw the largest outflows for two consecutive weeks, suggesting that investors are actively managing their ETF portfolios.

ETFs focused on Communication Services and Technology sectors have been particularly popular, with consistent net inflows. Additionally, investors have been using ETFs to take advantage of the rebound in the Chinese stock market, with strong inflows beginning in February.

The introduction of spot bitcoin ETFs in January allowed investors to access the leading digital currency through a vehicle approved by the Securities and Exchange Commission. This led to $12 billion flowing into various spot bitcoin ETFs in the first quarter alone.

Further emphasizing the trend, the SPDR S&P 500 ETF Trust (SPY) reached a record high for AUM in late February, driven by the stock rally in companies like Nvidia and other major tech firms. This indicates strong investor interest in gaining exposure to high-performing stocks through ETFs.

U.S. House Approves Blockchain Development Bill

The U.S. House of Representatives took a significant step on Wednesday, voting 279-136 in favor of the Financial Innovation and Technology for the 21st Century Act (FIT21). This bipartisan support marks a crucial milestone for the cryptocurrency industry, as it represents the most substantial legislative achievement for digital assets to date. With a notable number of House Democrats crossing party lines, the bill’s approval signals a strong desire to establish clearer regulations for the digital asset market.

FIT21 is the first major cryptocurrency bill to successfully pass through one chamber of Congress. The next challenge lies in the U.S. Senate, where the bill’s future remains uncertain. Unlike the House, the Senate has not yet introduced a counterpart bill, and the level of support for similar legislation is unclear. The Senate’s relevant committees have also not dedicated the same amount of effort to the crypto issue, which adds to the uncertainty of the bill’s prospects.

The United States has lagged behind other countries in creating comprehensive regulations for the cryptocurrency sector. Despite Wednesday’s victory, the process of implementing effective oversight is far from complete. Representative Josh Gottheimer (D-N.J.) highlighted the necessity of clear rules for the industry, describing the legislation as “well-reasoned, thoughtful, bipartisan” and emphasizing the importance of collaboration to turn it into law. Gottheimer, along with 70 other Democrats and 208 Republicans, supported the bill, while only three Republicans and 133 Democrats opposed it.

President Joe Biden expressed opposition to the bill through a policy statement, but he did not explicitly state he would veto it. This is in contrast to a recent situation where he threatened to veto a congressional effort to overturn an SEC policy on crypto accounting. SEC Chair Gary Gensler has also voiced strong opposition to FIT21, arguing that it is unnecessary and could undermine existing securities regulations.

The legislation, primarily driven by House Republicans, aims to create a regulatory framework for the U.S. crypto markets. It sets out consumer protections and designates the Commodity Futures Trading Commission (CFTC) as the main regulator for digital assets, specifically overseeing non-securities spot markets. The bill also seeks to clearly define the distinctions between securities and commodities in the context of cryptocurrency.

Representative Maxine Waters (D-Calif.), the ranking Democrat on the House Financial Services Committee, criticized the bill, arguing that it would allow crypto businesses to avoid existing securities laws. She contended that these companies have already profited significantly from what she described as unlawful activities and that the bill would essentially legalize these practices.

Before the vote, the House debated several amendments to the bill proposed by Representatives Greg Casar (D-Texas), Brittany Pettersen (D-Colo.), Ralph Norman (R-S.C.), and Scott Perry (R-Pa.). Casar’s amendment to reduce a crowdfunding exemption from $75 million to $5 million was rejected, but the other proposed changes were accepted.

This legislative move comes at a time when centralized cryptocurrency platforms are dominating Blockchain-related mergers and acquisitions (M&A). According to GlobalData’s 2024 report on Blockchain technology, M&A activity involving Blockchain technology has been on the rise, with 3.7% of all technology M&A deals in 2023 related to Blockchain, up from 2.2% in 2020. The primary targets of these deals have been Blockchain development platforms, mining infrastructure, and crypto exchanges.

Major centralized crypto exchanges like Coinbase and Kraken have led this surge in M&A activity. Between 2014 and 2023, the majority of these transactions were based in the U.S., accounting for 35% of all Blockchain-related M&A deals globally.

The passage of FIT21 by the House represents a significant policy victory for the crypto industry in the United States, despite the strong opposition from some lawmakers and regulatory figures. As the bill moves to the Senate, the debate over the appropriate level of regulation for digital assets will likely intensify. Whether FIT21 can secure enough support in the Senate to become law remains to be seen, but its approval in the House marks a pivotal moment in the ongoing effort to create a more defined regulatory environment for the burgeoning cryptocurrency market.

Crypto Community Stands By Ex Binance CEO CZ Ahead of Imprisonment

Changpeng Zhao, known widely as CZ, has begun serving his prison sentence at a low-security federal prison in Lompoc, California. This development marks a significant moment for the cryptocurrency community, which has shown strong support for the former CEO of Binance, the world’s largest cryptocurrency exchange. The confirmation of his imprisonment came through his legal team at Latham and Watkins.

The reaction from the crypto community has been largely positive. Many members see Zhao’s decision to serve his sentence as a strategic move to protect Binance from potential fallout. One user on Reddit expressed that CZ’s actions are crucial in maintaining the stability of Binance, especially considering the negative impact that the collapse of FTX had on the crypto industry. The user noted that Zhao’s plea and resignation were necessary steps to ensure Binance’s continuity and prevent a similar catastrophe.

CZ started his prison sentence in a low-security federal prison in Lompoc, California.

( low Security ) means: a type of prison where prisoners have the most amount of freedom because they are not considered dangerous and are trusted not to escape

Stay safe, My friend
CZ pic.twitter.com/w1naxjBnOg

— Elja (@Eljaboom) June 1, 2024

Zhao has also shared his plans for after his release, indicating a strong intention to remain active in the cryptocurrency world. He plans to maintain his current crypto holdings and engage in passive investing, signaling his ongoing confidence in the market. Zhao views this period as an important phase for the cryptocurrency sector, emphasizing the need for adherence to regulations and rules.

In April, Zhao was sentenced to four months in prison by Judge Richard Jones in the U.S. District Court for the Western District of Washington. The charges against him were related to money laundering activities at Binance. Alongside the prison term, he was ordered to pay a $50 million fine. This sentence was notably lighter than the three years recommended by federal prosecutors, reflecting a significant reduction from the original sentencing guidelines, which suggested a term of 12 to 18 months. Zhao’s legal team had requested a sentence of five months of probation instead.

Before receiving his sentence, Zhao made a public apology, acknowledging his failure to implement an effective Anti-Money Laundering (AML) program at Binance. He expressed regret for his actions and took full responsibility, highlighting that he had spent considerable time reflecting on his mistakes.

In November, Zhao reached a settlement with the U.S. government to resolve a long-standing investigation into Binance. As part of this agreement, he stepped down from his role as CEO. This settlement included a substantial financial penalty, with the U.S. government ordering Binance to pay $4.3 billion in fines and forfeitures. Zhao personally agreed to pay an additional $50 million fine.

Despite no longer being at the helm of Binance, Zhao remains a significant figure in the company, reportedly holding an estimated 90% stake. His involvement in the company and the broader crypto community is likely to continue post-imprisonment, given his stated plans and ongoing support from various quarters.

The scope of Zhao’s alleged misconduct involved knowingly failing to establish a robust AML program as mandated by the Bank Secrecy Act. This failure allowed Binance to process transactions that included proceeds from illegal activities, including transactions involving individuals in jurisdictions under sanctions. This lack of compliance led to the significant fines and penalties imposed on both Zhao and Binance.

The cryptocurrency community’s support for Zhao contrasts sharply with the fate of another prominent figure in the industry, Sam Bankman-Fried, the founder of FTX. Bankman-Fried is currently serving a much longer prison sentence of 25 years for securities fraud and related offenses. Unlike Zhao, Bankman-Fried did not reach a settlement with the government and faced a more severe outcome, largely due to the extensive cooperation of his former associates with the prosecutors.

Among those who wrote in support was Zhao’s sister, Jessica Zhao, who emphasized her brother’s commitment to ethical conduct, citing his efforts to ensure Binance never misused customer funds during the fallout of FTX. He Yi, another co-founder of Binance and the mother of Zhao’s three children, described Zhao as a guardian of the cryptocurrency sector, underscoring his dedication despite the lack of clear regulatory frameworks.