Like the rest of the world, money is going digital. Credit and debit cards, electronic fund transfers, online services like PayPal, and peer-to-peer services got a boost during the COVID pandemic. Cryptocurrencies did as well, along with decentralized finance (DeFi) and smart contracts. In the latest issue of Financier Worldwide, Becker Shareholder Robert C. Brighton, Jr. expounds upon what might be next in this expanding sector of finance. Governments have taken note of central bank digital currency, or “CBDC” for short, and that could foreshadow a shift just as significant as the abandonment of the gold standard after World War II.

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Robert C. Brighton Jr. is a shareholder at Becker & Poliakoff and currently serves as the Co-Chairman of the Subcommittee on Florida Securities Laws (Corporations, Securities & Financial Services Committee of The Florida Bar’s Business Law Section). To learn more about Rob, please click here.

The next digital revolution will be based on blockchain, a system by which independent computers verify transactions with no central authority, as described by Becker Shareholder Robert C. Brighton, Jr. in the latest issue of Financier Worldwide. In these systems, security and reliability are maintained through consensus. For public blockchains, any change in the ledger is transmitted to every member on the network. These form the basis of cryptocurrencies, such as Bitcoin. Another is ether, which also allows for the execution of functions or agreements and is used in many Web3 transactions.

While these new currencies have experienced a great amount of growth, one drawback is that as more transactions occur, and the more cryptocurrency or tokens created, the record grows and requires more processing power to maintain. This appetite is one of the impediments to the arrival of the next digital revolution. On the other hand, there are a number of factors pushing it forward: institutional distrust, untapped capital, innovative businesses, the surge in public equities, and governmental regulation. Overall, there is a common belief that decentralized technologies will serve some sectors better than discredited financial institutions have in the past. Another blockchain technology lies in non-fungible tokens, or NFTs, which attach a record of ownership to a digital asset, such as a digital artwork.

In 2022, there will be a few trends to watch: growth in NFTs to include real estate and consumer goods, along with social-media apps; a transition from intense “proof of work” to “proof of stake,” which is a system based on a pledge of ownership; the use of cryptocurrencies tied to other currencies and tangible assets; and the growth of some system to regulate it all.

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Robert C. Brighton Jr. is a shareholder at Becker & Poliakoff and currently serves as the Co-Chairman of the Subcommittee on Florida Securities Laws (Corporations, Securities & Financial Services Committee of The Florida Bar’s Business Law Section). To learn more about Rob, please click here.