As we head towards 2025, the cryptocurrency industry faces a rapidly evolving environment, from regulatory changes to technological advancements. Digital Journal had the opportunity to speak with Peter Chung, Head of Research, Presto Labs, to answer five critical questions that will shape the future of this dynamic industry.
Peter Chung is the Head of Presto Research, a research unit of Presto, a Singapore-based algorithmic trading and financial services firm founded in 2014. Presto executes more than 100 million trades daily in both digital assets and traditional finance. Prior to joining Presto Research, Peter built and led the research team at Korbit, Korea’s oldest crypto exchange, and has garnered a reputation for being one of the top crypto research houses in the country.
Digital Journal: How will recent SEC developments, like the approval of options on spot Bitcoin exchange-traded funds, impact institutional adoption of cryptocurrencies?
Peter Chung: The availability of regulated instruments that can be used for hedging, leverage trading, and yield generation opens the door to a whole new class of institutional investors that were previously inaccessible. Structured notes are a prime example of investment products that utilize the yield generation feature of options.
Just as spot exchange-traded funds (ETFs) have significantly expanded Bitcoin’s audience, options contracts further enhance its versatility as an investment asset and broaden its appeal to a wider range of investors, adding more legitimacy to this emerging asset class. A useful analogy may be the introduction of automobile insurance in the early days of the automobile industry, which contributed greatly to its mainstream adoption. Likewise, a put option is effectively insurance against Bitcoin’s downside risk.
DJ: Do we expect to see more major custodians entering the cryptocurrency space, and what does that mean for institutional trust in digital assets?
Chung: Traditional custodian banks’ interest in the digital asset has increased substantially after the spot Bitcoin ETFs listing earlier this year. The $64bn assets held by the spot ETFs are currently mostly in custody by one entity, namely Coinbase Custody. Major custodian banks such as BNY Mellon and State Street are keen to grab some of this fast-growing market. If these big brand custodian banks start offering custody service for digital assets, it will go a long way in adding more credibility to the asset class in the eyes of the mainstream institutional investors.
The reason why they haven’t done so yet is due to the SAB121, an accounting guideline that the SEC issued a couple of years ago which makes it impractical for traditional custodians to custody digital assets. In response to the banking lobby, the US Congress had passed legislation in May that was intended to remove the SAB121, but President Biden vetoed it. If a new administration after the election takes a more lenient approach and SAB121 is removed, the major custodial banks may finally be able to offer digital asset custody.
DJ: Bitcoin compared with other cryptocurrencies: Will we see greater separation between Bitcoin as a store of value and other digital assets as experimental ventures?
Chung: As digital assets become more integrated with traditional finance and the public’s knowledge and familiarity improves, more people will be able to discern the qualities that make BTC a standout from the rest of the crypto, leading to greater separation. The altcoins can still serve a purpose within an investment portfolio, but its role will be limited to those seeking exposure to the far end of the risk curve.
DJ: With the rising adoption of stablecoins, what role will tokenized currencies play in mainstream finance by 2025?
Chung: The benefit of stablecoins is that it allows USD to be transferred over a digital network that doesn’t rely on centralized intermediaries. This feature benefits different consumers differently depending on the financial regimes that they are under.
For instance, in the developed world, the main benefits are in the form of cost efficiency gains as value exchange can occur without the layers of middleman that the traditional finance network requires. This is why global payment companies such as PayPal or Visa have been running pilot services to incorporate stablecoins into their payment network. Further progress may be announced next year.
In the developing world, billions of people are suffering from the tyranny of an unstable or mal-functioning financial system. It’s usually caused by a corrupt or incompetent banking regime (or lack thereof). In such cases, introducing an alternative rail where tokenized USD can be accessed and exchanged can bring a lot of benefits because it removes these malicious intermediaries. For instance, in countries like Argentina where its people don’t have trust in their own currency, they want to save in USD. The Argentinian government however limits the USD access fearing massive capital flight out of their own currency. In such a situation, USD stablecoin can be an answer as stablecoin doesn’t require an intermediary for you to hold it. Because you are self custodying the USD stablecoins, you are not at the mercy of the government controlled intermediaries to exercise sovereignty over your own assets.
DJ: How will the broader crypto market evolve—will we see consolidation, or will experimentation continue with hundreds of cryptocurrencies?
Chung: Experimentation will continue. What it means by default is that many will fail because that’s the nature of experiments. That’s how innovations come through. It’s a repetitive trial and error process, where lessons from failures become the foundation for world-changing applications. Consolidation too is a natural part of such a process so this is a given and should not be a surprise to anyone involved in the frontier of new technologies.
