In this exclusive roundtable, we speak to Riccardo Tordera, Head of Policy and Government Relations for The Payments Association; Chief Market Analyst at AvaTrade, Kate Leaman; Senior Product Manager of Blockchain and Crypto at Lab49, Martin Masser; and CEO of IOV Labs, Daniel Fogg, about an anticipated boom in the crypto wallets market and how regulatory change could help fuel its expansion.

Q1: Future Markets Insights (FMI) suggests the crypto wallets market is set to soar by reaching US$3.675bn in size by 2033, a CAGR of 9.3%. Why is the crypto wallet market set to grow? 

Riccardo Tordera:

As more continue to use crypto for everything from investment to day-to-day payments more people will need wallets. In addition, with greater use of stablecoins and CBDCs by then, there will be wider use of digital currencies and hence greater uptake for digital wallets.

Kate Leaman: 

The crypto wallet market is set to skyrocket in the next few years. It's all thanks to the growing popularity of cryptocurrencies as a preferred way to invest and make payments. As more and more people jump on the crypto bandwagon, they need trustworthy and secure digital wallets to handle their digital assets. 

On top of that, businesses are starting to accept cryptocurrencies as a form of payment, which means there's a real need for user-friendly wallets that make these transactions smooth and hassle-free. Crypto wallets in Asian markets, namely India (CAGR 12.3% by 2033) and China (CAGR 8.3% by 2033), are expected to grow substantially.

Martin Masser: 

A major driver is the increase in the acceptance and use of cryptocurrencies. As awareness and understanding of digital currencies rise, more people are embracing the use of crypto wallets for transactions.

Secondly, the global use of cryptocurrencies is propelling demand for the key functionalities crypto wallets offer, such as convenience and security. This, in turn, is attracting more users to the digital wallet market as customers seek to find reliable and suitable methods of transaction.

Daniel Fogg: 

Wallets are the gateway to blockchains and assets, so as the adoption of blockchain technology continues to grow, the wallet market will follow. Wallets are currently the heart of the crypto experience: everything individuals do to interact with crypto happens through them. 

I’d say that the figure of US$3.675bn feels quite low, considering the amount of development taking place in the space right now. Many wallets are making revenue from the on-ramp and off-ramp fees, integrating dApps, or even receiving fees for listing certain tokens. There’s also an increasing number of multi-signature wallet solutions designed for enterprise crypto treasury management gaining adoption. 

Another interesting area of wallet growth is solutions built for traditional fintechs looking to create new products on crypto rails. These include paid subscription products such as Alpha Wallet and free open-source modular solutions like RIF Wallet.

With all this going on I’m surprised the figures aren’t predicted to be bigger by 2033. 

Q2: Crypto wallets in Asian markets, namely India (CAGR 12.3% by 2033) and China (CAGR 8.3% by 2033), are expected to grow substantially. Why these markets in particular? 

Riccardo Tordera:

China is growing due to the growth of the digital yuan project where in a very short period of time, over 300 million wallets were set up. In India, we have seen a greater push towards the CBDC digital rupee which could have an equal take up on growth.

Kate Leaman:

Asia, particularly India and China, is playing a vital role in driving the growth of the crypto industry. With their massive populations and increasing internet and smartphone usage, these regions have become hotspots for crypto wallet adoption. Adding to the momentum, the governments in India and China have put in place supportive policies and initiatives that encourage the use of digital currencies and promote financial inclusion. This favourable environment is fuelling the market for crypto wallets, making it a promising landscape for both users and companies.

Martin Masser: 

Both India and China have large populations with a growing interest in cryptocurrencies and their wide range of use cases. We have seen a huge surge in crypto gaming as one example from countries including the Philippines. Moreover, increasing internet penetration and smartphone usage in these regions provide an ideal environment for the adoption of crypto wallets. This, coupled with a rising young, tech-savvy demographic that is more inclined towards exploring innovative technologies such as cryptocurrencies, is driving demand for crypto wallets.

Additionally, Asian markets have many untapped resources, such as India’s renowned developer community. More and more crypto companies are looking to these countries to help scale up and drive substantial growth in their crypto wallet services. 

Alongside this, governments are becoming more open to crypto activities as they realise the potential economic gains from welcoming the industry. For example, the Hong Kong government has made its desire to turn the country into a crypto hub well-known.

Daniel Fogg: 

Crypto assets in China and India have been heavily regulated, and the market in China has been suppressed for some time. That said, the demand for crypto assets and decentralised finance solutions, such as accessing the US dollar, equitable lending and borrowing, borderless payments, and remittances, is definitely increasing across Asia. 

The use cases for these DeFi solutions are more common in Asia, as access to a broad range of financial services often isn’t available within these emerging markets. Obviously, as crypto wallet technology continues to grow, so too will the demand in these nations.

Q3: What needs to change in crypto to ensure this growth is possible, and possibly beaten; is there still a lack of consumer trust? 

Riccardo Tordera: 

Stablecoins will be going to ensure that growth will be possible and the addition of CBDCs will give the possibility of beating these targets. The growth of GenZ and the growth of web3 will drive even greater growth.

Kate Leaman: 

In order for the crypto industry to keep growing and exceed expectations, it has a few challenges to tackle. One of the main challenges is building trust among consumers. Many people are hesitant to fully embrace cryptocurrencies due to concerns about fluctuations in value, security risks, and uncertainty around regulations. 

To address these concerns, it's important for the industry to prioritise implementing stronger security measures, educating users about the benefits and risks, and establishing clear and dependable regulations. By doing so, we can build trust and encourage more individuals to confidently use crypto wallets.

Martin Masser: 

Building consumer trust is critical. Strengthening security measures, implementing robust regulations and promoting transparency will all help to instil confidence in consumers.

In addition, as the crypto wallet market grows, competition will intensify. This will hopefully lead to providers making crypto wallets more advanced, secure and user-friendly as they battle to win customers, which will lead to a market saturated by high-quality wallets – all helping to further instil consumer trust.

Daniel Fogg: 

Yes, unfortunately, there is still a lack of consumer trust, which can partially be attributed to misleading social media marketing campaigns that promote tokens that aren’t the premium assets we know store value, like Bitcoin or USDC, often resulting in scams. 

These products have little to no tokenomics, and it almost becomes a game to those behind the scenes. I think educating consumers and introducing levels of regulation will definitely help matters, but responsible players in the crypto market also have to do everything in their power to protect customers as best they can in order to build trust. 

It’s also important to recognise that building trust will take time, and it’s unlikely that we’ll see global adoption of a radical new technology before people become comfortable with it.

Q4: We’ve seen MiCA in the EU; do regulations need to be more widespread, can you see other markets adopting similar regulations?

Riccardo Tordera: 

MiCA is now set to come into force but may in fact reduce the market in Europe rather than letting it grow, due to the restrictions that this regulation has imposed. The UK on the other side has seen how the approval of the Financial Services and Markets Act in July 2024 has enabled a faster path toward the design of the future regulatory framework for crypto assets and we can see how the government is steering the wheel towards the ambition of making this country the global hub for crypto assets technology. 

The Payments Association welcomes this and is constantly talking to key stakeholders to support a dynamic and agile approach to regulation in this sector with the aim of making UK plc the place to be.

Kate Leaman: 

Yes, the regulatory landscape in the crypto industry is evolving, and we can expect to see more widespread regulations in the future. The recent introduction of MiCA (Markets in Crypto Assets) in the EU is a significant step towards creating a framework for the regulation of cryptocurrencies. 

As other markets observe the developments in the EU, it's quite possible that they will adopt similar regulations to ensure consumer protection, enhance market integrity, and promote innovation in the crypto industry. By adopting regulations that strike the right balance, countries around the world can create a safer and more conducive environment for the growth of cryptocurrencies and related services.

Martin Masser: 

Regulation plays a pivotal role in the growth and stability of the crypto market, and the introduction of MiCA in the EU is a good example. It provides a legal framework for crypto assets, enhancing investor protection and market integrity, and facilitating growth by providing clear rules and reducing risks. As the crypto industry matures, more countries will introduce regulatory measures to protect investors and foster market stability.

Daniel Fogg: 

Balanced regulations are a good thing, as they provide clarity around the types of businesses and products that can be built and run, whilst also offering consumers protection from bad actors and fraudulent activities. 

However, without balance, these regulations have the potential to constrain technological innovation, often prohibiting the growth of small businesses building on the blockchain. With the right regulations in place, consumers and businesses would be protected, whilst promoting economic growth through innovation. However, it’s a fine balance to strike.

Q5: What does the competitive landscape in crypto look like today?

Riccardo Tordera: 

With the likely start of a fresh bull market season after the hacking of Bitcoin in 2024 we may assist in a consolidation of the best crypto products, more tokenisation of assets including real estate, the growth of Defit, web3 and a better harmonisation between traditional and digital finance.

Kate Leaman: 

The competitive landscape in the crypto industry is dynamic and ever-evolving. Currently, there are numerous players in the market, including established financial institutions, fintech startups, and specialised wallet providers. 

With the growing popularity of cryptocurrencies, more companies are entering the market, increasing competition. This competition is driving innovation, offering users better services, enhanced security, and improved user experiences. However, regulatory compliance, brand reputation, and user trust will continue to be critical factors for success in this competitive landscape.

Martin Masser: 

As for the competitive landscape in crypto today, it’s a dynamic and evolving space. Established players like Coinbase and Binance continue to dominate the market, but new entrants are constantly emerging. What’s more, traditional financial institutions are also recognising the potential of cryptocurrencies and looking to enter the market. This competition will continue to drive innovation and push the boundaries of what crypto wallets can offer.

Daniel Fogg: 

The crypto landscape is often mistakenly viewed as monolithic. I find it helpful to look at the sector as either mainly centralised, custodial finance crypto (exchanges, ramps, institutional crypto actors), mainly decentralised, non-custodial tech crypto (Layer-1 protocols AKA blockchains, DeFi, developer tools), and then what you could broadly call the Metaverse (NFTs, GameFi, decentalised social networks). 

Broadly speaking, we have seen finance crypto retreat in capital allocated and we have seen a number of notable collapses, like Signature Bank, BlockFi, Celsius, and of course, FTX. Tech crypto is continuing to build but with a greater emphasis on finding product-market fit in the short term and without the scale and certainty of the venture capital support we saw during the 2020-22 bull market. 

The metaverse is still early, with exuberance for NFTs having declined dramatically, but still a lot of potential within the gaming, streaming, and cultural applications of blockchain technology. And across the board, over the last 9-12 months, there has been a broad decline in transaction volume and total value locked across all platforms. 

This has been difficult for the industry, because many of the early-stage, small developer-led companies rely upon the venture investment streams to continue with their innovative projects. During the downturn, there’s also been a flight towards more stable, premium assets, such as Bitcoin, which has driven a period of experimentation on Bitcoin away from the main chain. 

Despite the down cycle, the IOV Labs developers launching projects on Rootstock remain focused on building Everyday DeFi solutions for those in emerging markets who need it most. The reason Rootstock is built on top of Bitcoin is that we believe that while many assets will come and go, Bitcoin will remain. 

Q6: How do you think crypto wallets will look in 10 years, will there be increased competition?

Riccardo Tordera: 

Definitely. Furthermore, CBDCs wallets may well be separated by the ones from the general ones and they are likely to be verified or validated by regulated entities to ensure that the CBDCs are only distributed to the legitimate holder.

Kate Leaman: 

Right now, there are loads of different players in the market, like big financial institutions, fintech startups, and specialised wallet providers. As cryptocurrencies become more popular, more and more companies are getting involved, which means there's even more competition. 

This healthy competition is driving innovation, so users can enjoy better services, stronger security, and improved experiences. However, it's important for companies to stay on top of regulations, maintain a good reputation, and build trust with their users if they want to succeed in this competitive landscape.

Martin Masser: 

In the next ten years, crypto wallets could evolve significantly as we see advancements in technology. Wallets are still very difficult to understand if you are not familiar with crypto and increased competition among providers will mean everyone is striving to create wallets with more user-friendly interfaces, enhanced security features, and seamless integration with various platforms.

For example, currently, most wallets are via a browser plugin, I can imagine that in the next few years, providers will aim to create wallets that can be integrated within your browser, phone, desktop app and probably even with Google and Apple Pay.

Daniel Fogg: 

The great thing about digital assets is that you can view and use them across various different wallets, so it will be interesting to see how they evolve over the next 10 years. 

It’s inevitable that competition will increase, and therefore many of the wallets that exist today will fall by the wayside, while well-designed, secure, popular wallets like Trust Wallet and Ledger should hopefully still be around. 

However, I imagine that in 10 years, crypto wallets won’t look like crypto wallets at all, rather they will be integrated into normal banking apps. 

The lines between crypto wallets and banking apps will start to blur, and financial products customers interact with on a daily basis will likely have crypto rails, but customers won’t be able to distinguish any difference in how they interact with both products.

Going a little deeper, I think we should expect to see more identity verification tokens within wallets. These cryptographically verified digital copies of passports, driver's licences, or ID cards could be the future of global identification.