Fieldfisher corporate partner Tim Bird considers the prospects and pitfalls for tech deal-making in the year ahead.
2018 turned out to be a sobering year for those invested in blockchain – either directly via cryptocurrencies and equities in blockchain businesses, or indirectly in time and effort spent tracking and advising on blockchain-oriented deals.
This time last year, many of us were eagerly anticipating CoinsBank’s Blockchain Cruise Asia 2018, kick-starting what was widely expected to be a year of strong growth in the blockchain and crypto sector.
At the time of setting sail from Singapore on 15 January, a Bitcoin was valued at around $12,000. Much to the detriment of on-board morale, the price plunged by 25% while the ship was somewhere in the Malacca Strait between Singapore and Phuket.
This alone led to many blockchain-based cryptocurrency projects being mothballed during the year.
More positively, perhaps, the combined effect of moves by all the world’s major financial regulators meant that the initial coin offering (ICO) market ended the year with entirely new nomenclature and the rise of the security token offering (although a few farsighted individuals had been referring to crypto tokens as “securities” since their inception).
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While blockchain will continue to mature in 2019, much of the attention previously fixed on this sector is likely to shift to the underlying infrastructure that enables cryptocurrency exchange.
Mobile connectivity will continue to replace landlines and 5G, when it comes, will enable those countries which skipped copper-wire infrastructure to capitalise on their early adoption and to accelerate internet of things (IoT) and all things data.
- Social media
Having developed on a more or less parallel track to blockchain and cryptocurrencies for the past few years, social media platforms are now starting to move into fintech territory.
Facebook has been aggressively growing its blockchain capability and on 20 December 2018, the social media giant confirmed rumours that it plans to launch its own cryptocurrency – a stablecoin tethered to the US dollar, in order to provide WhatsApp users with an all-round experience, similar to that offered by WeChat in China – in the foreseeable future.
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Facebook stressed that it is still far from releasing the coin and that it is still working on the strategy, including a plan for custody assets, or regular currencies that would be held to protect the value of the stablecoin.
While attempts by various start-ups around the world to launch their own cryptocurrencies, including stablecoins, have with a few notable exceptions, struggled to gain traction, social media giants have some important comparative advantages.
Facebook has an estimated 2.5 billion global users, more than $40 billion in annual revenue and greater experience navigating regulatory issues than most start-ups, and may have a better chance of making a stablecoin that sticks – even if we don’t see it before the end of 2019.
It would be the first large technology company to launch such a project, securing first mover advantage in its class without having rushed in at the beginning to make the mistakes other smaller companies have done.
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However, it is likely to be a bumpy year for the social media sector in general, as global privacy policies and customer usage continue to move away from text-based sharing and content generation to more video and image-based experiences.
An area of the tech sector where the virtual intersects with the physical is the hardware on which the tech sector depends and the raw materials needed to build it.
Demand for batteries that power mobile devices rises with every new generation of smart phone and concerns about the amount of electricity needed to power blockchain technologies is spurring more interest in renewables and battery storage/fuel cells to produce and retain low-carbon energy.
The main driver of the battery sector is the electric vehicles (EVs) market, as EVs continue to snatch market share from internal combustion-engine based transportation at an astounding rate.
Battery technology is starting to make real impact in many industries and this trend is likely to continue in 2019.
Most car manufacturers now either have at least one model of electric car in production or on its way to launch and price tags will continue to fall, making them more accessible to the mass-market.
A more novel development could be the deeper integration of renewable energy into blockchain and cryptocurrency technologies in order to reduce the carbon footprint of these rapidly expanding sectors.