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Software Technology

The future of software consulting by Dominik Zyskowski, Software Consulting Director

The future of software consulting by Dominik Zyskowski, Software Consulting Director

There are many faces to software development consulting. This is why the demand for companies that will be able to address all of them will only increase in the next few years. In the following piece, I dive into the topic of software consulting and possible scenarios for its future. Continue reading to learn more about:

How it all started: a journey from an academic post to consulting international market leaders in terms of software development

My background is strictly scientific. When I first started my career, I worked at a university on R&D projects, mostly focused on developing IT solutions from scratch. I had to come up with the desired solution and then plan all the steps that were necessary in order to develop it. I enjoyed the possibility that I could work on something from the beginning, plan all the business assumptions, and then document the process of achieving them. Since all the projects were focused on addressing unique business challenges, I’ve gained a lot of valuable insights into the best ways of approaching different problems and business needs in terms of software development. Especially in situations where there are no already-built software solutions that address those problems and needs. During my doctorate, I got offered a job in PayU, where I soon started as a Product Owner. It was the time when agile was only being introduced in companies and I was on the front line when the new approach was implemented. Before that, the main methodology used to deliver projects was traditional SDLC and was based on the combined rules of Prince2 and agile.

The future of software consulting by Dominik Zyskowski, Software Consulting Director

During my time at PayU, I have become specialized in business analysis – as a Product Owner, I was working closely with the team but at the same time I was the decision maker and domain expert driving the direction of the projects. Later, when I started working at Espeo Software, I firstly continued my path as a Product Owner. Back then, we primarily worked on projects with public clients and my role was to directly translate the client’s specification into what our teams had to custom develop. After the company’s pivot to the international market, I took over the responsibility of managing the primary contact with the clients. As part of this role, I had the chance to put my past experience to good use. The ability to listen well and inspire trust, as well as the knowledge of how to integrate clients’ needs with software development and business premises helped me succeed as a Consulting Director. Therefore, clients are assured that they are discussing their software needs with a person who can guide them through all the steps required in order to help them achieve their business objectives. As the company grew, I slowly moved away from being involved in projects and focused solely on software consulting. After all these years, I feel like all my previous experiences led me to my current position. I enjoy my work especially thanks to a challenging and fast-paced environment where I am exposed to different business problems that I can help solve.

“Custom development can address many business needs but sometimes SaaS is the better option. During the consultations with clients, I am always driven by the optimal solution and if a ready-made product can help the client more, I don’t refrain from recommending it.”

What is software consulting? My thoughts on the matter

Software consulting is a process which provides the opportunity to make informed and cost-efficient investment decisions which can later lead to much larger IT investments and therefore, costs. It is an excellent way for businesses looking to invest in a certain solution to gain an understanding of the markets’ implementability. It is utterly important to consult a business idea with an expert who has considerable industry experience and knows what alternatives to that business idea already exist. One of the reasons for this is that an external software consulting expert can advise on the optimal technology that should be used in a particular project. From experience, I can also add that software consultants care for their clients’ success and are determined to help them achieve it. What is more, software consulting enables efficient cooperation.

When it comes to custom solutions, there are many different ways to achieve one desired result. As a Consulting Director, I know how to make sure that both client and the development team are on the same page. Providing software consulting services brings a great deal of satisfaction – oftentimes clients simply don’t know how to overcome their business obstacles. I can advise them on the optimal solution as a software consultant with experience from a variety of industries – in most of the cases we as a company have already solved a similar case and additionally to sharing valuable insights, we can do the same for them. This is possible thanks to the large number of projects that we have delivered over the years. There are particular project similarities that can be discovered and reused, despite the industry the client operates in. As a result, I can use the previously gained insights and advise companies despite their primary field.

My take on the advantages of software consulting from the client perspective

First of all, investing in digital solutions that were previously consulted has a much higher probability of success. This is because in the phase of consulting, the potential risks and opportunities are identified and discussed thoroughly. Moreover, consulting workshops create a thread of understanding between the client and the software development provider – after the workshop, there are little to no uncertainties. Both parties are aware of the previously mentioned opportunities and risks, technologies that have to be used as well as the order of particular project stages. What is more, software consulting workshops offer an additional benefit – the flexibility of choosing the vendor who will be in charge of developing the final software. This is possible due to detailed deliverables that are produced during the consultancy process. It is important to mention that the client is not obliged to develop the software with the vendor who worked on the consulting.

“Software consulting should be objective and detached from the particular company. The results of the software consulting workshops should be easily applicable by a different software development vendor.”

A good consultant is aware of his or her weak points. This is why during the software consultancy process, the consultant draws on his or her knowledge from many various sources and sometimes cooperates with other experts. At Espeo, if we happen to work on a case where we lack the proper experience of, we work with experienced external consultants who excel in needed areas. This particular net of external experts creates additional value for the client as the project is managed by people with very specialized expertise (usually by the lead consultant and subject matter expert).

The current state of software consulting

One thing is for sure. Businesses looking for ways to stay competitive by investing in digital solutions put a particular focus on convenience. They intend to purchase a 360-degree service that includes not only consulting, but also audit, design, implementation, and maintenance. Nowadays, there is a growing number of companies that address that need. For instance, vendors developing mobile apps offer additional services consisting of various actions that help position the end-solution on the market (e.g. through search engine optimization, online and offline marketing among others).

In the light of the above, one of the most prominent trends in the consulting and development industry is the increasing specialization of such companies. They are primarily interested in increasing their customer contact and product offerings. Second trend I want to discuss is the fact that big, well-established consulting companies are changing their structures and extending their offerings to be more like software houses. They no longer offer only strategic consulting but also get into the role of the final provider by implementing the solutions they have previously consulted. This is a big shift considering that in the past, companies like these would give their recommendations which were later implemented by other companies. Now, they are slowly entering the software development market. On the other hand, more and more software development companies do the contrary by adding consulting services to their offerings.

Additionally, one undeniable trend is the increasing popularity of building digital solutions with low-code no-code platforms. In response to the demand, companies that are specialized in choosing the optimal ready-made solutions for particular business challenges are becoming growingly relevant. Furthermore, many companies tailor their systems to meet the needs of a variety of business types. An example of such a company is Jira which offers a lot of different plug-ins, e.g. for recruiting, project management etc. When it comes to the consulting trends in terms of technology, AI, blockchain technology, IOT as well as virtual reality, are constantly in the limelight. Clients who want to invest in projects that are developed using these technologies become increasingly interested in software consulting as it helps them make informed, data-driven decisions about the investments and their possible business outcomes.

The future of software consulting: my predictions

Expertise and proven experience will always be of value. As the world becomes increasingly digital, so must the companies all over the world. However, in order to digitalize in an efficient way, the business owners will have to base their decisions on data-driven premises which can be discovered with the help of software consulting. This is why, in my opinion, the popularity of software consulting in managing various projects will continue to grow. In terms of technologies, there will always be a new solution which will grab the attention of businesses. In my career, I saw this happening quite often – businesses wanted to develop a certain project in a particular technology solely because it was popular at the time. However, it is important to consider if that technology is the optimal one in order to arrive at a desired result. Here, again, software consulting can help as it discovers all the pros and cons of a particular approach and will continue to do so. To sum up, as the complexity of the IT industry increases, the demand for proven experience and consulting will rise.

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Entrepreneurship Software Technology

The future of buying software development: Aki Inkeroinen’s and Kris Honkola’s insights

Welcome to the second article from our FutureTalk series, where together with industry experts, we cover the future of various topics related to software development. In the following article, we focus on the predictions for acquiring software solutions.

Continue reading to find insights on the topic from experienced IT professionals: Aki Inkeroinen, accomplished Sales Leader and ICT Business Developer who is currently a Managing Director of Espeo Software, and Kris Honkola, Senior Digitalization Consultant with over 30 years of experience in the IT industry.

Table of content

The evolution of the purchase model of software solutions. Will software as a service platforms replace custom development? Experts weigh in

According to Aki, the process of solution selling itself has not changed much over the years. The business needs have to always be considered together with the decision makers and this is a step that cannot be omitted. That being said, certain changes can be observed when it comes to the awareness of companies in terms of different technologies and solutions. Today, business owners can easily research various approaches so they know more or less what is required in order to bring their idea to life. This greater awareness impacts how software development providers interact with clients who wish to be more involved in the process. Another change that can be noted (and that wasn’t available 10 years ago) is the availability of Software as a Service platforms that were created as a response to the growth in market demand. While SaaS solutions address a range of needs, most of them do so in a generalized way. Taking this under consideration, custom development remains the best choice for companies who want to build a digital solution that will give them the competitive edge.

The future of buying software development: Aki Inkeroinen’s and Kris Honkola’s insights

Custom development is particularly useful in industries such as healthcare, where a lot of data is processed by a number of parties. SaaS solutions are not the best option in such cases as they rarely meet all the business needs and requirements. Hence, a certain amount of custom development is always necessary. This is why sometimes building a digital solution from scratch is actually the more profitable option. That being said, SaaS platforms make a good choice for businesses where the digital product needs to have a standard functionality that can be easily provided without customization, for instance SaaS platforms for accounting, email, and other standard business processes. Custom development is often avoided by companies since it is seen as a time-consuming and costly process. However, it is not entirely true. Both Aki and Kris mentioned that over the years they worked with companies that purchased SaaS solutions which haven’t fully met the businesses’ needs. As a result, they had to be partially customized, which ended up costing more than a custom-made solution. Therefore, choosing a SaaS solution may prove to be just as time-consuming and expensive as custom software development. In the foreseeable future, more and more software as a service platforms will cover a wider range of needs, however, custom development will continue to be the choice of companies with more complex business objectives.

What are the trends in the way business owners collaborate with ICT teams?

A lot of businesses operate in a way where business owners are not included in the decision-making processes, especially when it comes to digital investments. The reason for it is the fact that often it is believed that the IT team should be the one making the final decision about the tools, as its members have the technical background and consequently, they will be the ones using them. It can be agreed that bypassing the business leaders is hence the reason why custom development may not be the preferred option while planning digital projects.

The future of buying software development: Aki Inkeroinen’s and Kris Honkola’s insights

The lack of business owners participating in planning digital investments needs is a real problem. Nevertheless, it is a universal phenomenon. According to Kris Honkola, every 10 years we can see a trend towards greater collaboration between business and IT teams only to see it disappear again. Why is it then important to balance the roles of decision makers and ICT teams? Shortly put, the overall competitive edge of the company will suffer if one party has more say in investment or development. Here are two possible scenarios of a such situation:

  • When the technical team does not incorporate the business owners’ insights, thereby increasing the chances of developing a solution that can be useless to the end-users. For example, the IT team might be experts on a certain technology so it is the one they take under consideration when implementing a new project, even though a different technology might be better.
  • When the ICT team’s value is overlooked by the business owners, the company can be deprived of crucial technical background and insights while developing a solution.

An external business consulting can be useful in this scenario – not only does it enable a collaborative discussion, but it also provides an external perspective on the problem. Many studies have been conducted on successful businesses that invest in digitalization to find out what factors make these investments successful. The common denominator in every case was the close collaboration between the IT department and business leadership. A successful investment can only be achieved if the business leadership works together with sales management, ICT, and other departments. Then, business owners have a better understanding of the technical limitations and possibilities and the technical teams know what is the overall business goal of the project they are involved in. To sum up, there is a direct correlation between the most profitable and successful companies and a close integration of the particular company departments. It is predicted that more companies will utilize this approach in order to maximize their growth.

How will the Finnish software development market develop in the coming years?

There is a growing trend toward remote work in Finland. As a result, the acceptance of hiring talent from outside Finland will grow. Moreover, an increasing number of companies will decide to outsource their software development needs. According to Aki Inkeroinen’s prediction, the trend of remote work will most likely spread to the public sector, where the developers usually had to work onsite. The model of remote work will likely also be accepted by banks and other organizations. What is more, for decades, Finland has been at the forefront of using outsourced ICT solutions. Now, thanks to an increase in cloud based software development, Finnish companies will continue to develop competitive solutions.

How will the needs of businesses change in the future when it comes to buying software solutions?

It is likely that the future needs of clients will solely address the issue of not having enough developers. Even now, companies cannot cherry pick the best developers due to the ongoing shortage of developers. We predict that more and more software houses will be approached by potential clients with this problem.

What is more, to get the best professionals to work on their projects, clients will need to be active in selling them to the developers. The reason for this is that developers want to work on interesting and challenging projects. They want to have a real impact on how they work and the tools they’re using to get the job done. Refactoring an old-fashioned system for instance is not an exciting, desirable project. In such a case, a better option would be to hire a team of experienced IT experts in order to build the system from scratch. By having to implement these interesting and complex digital solutions to stay competitive, businesses indirectly accelerate the digitalization process. We will see this trend playing a bigger and bigger role in the future.

Do you have more questions about the consulting? Let us know using the form below and one of our colleagues will contact you shortly.

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Other Software Technology

How to choose the right career path in IT: the perspective of working in a software house vs product company

The following article will explain how cooperation within a software house differs from cooperation within a product company. Moreover, they will tell you how the organization profile affects the development of the technological product.

The expertise comes from exposing yourself to experiencing new things and challenging your previous thoughts. Therefore, there are questions you probably ask yourself as an IT specialist. Where to work? Which place to choose for career development? What is related to working in a software house? Is it different from working in a product company?

We discussed these issues with our specialists, who built their career portfolios in various organizations. Adrian Warkocz, Senior Frontend Developer, and Michał Sipiak, Senior QA Specialist shared their perspective. They decided to return to Espeo after several years of gathering different experiences. Adrian and Michał are professionals who have designed a practical career path for themselves. Their point of view can be valuable both for clients and specialists seeking the perfect career path. We asked them the following questions:

What’s your perspective on working in a software house? 

Adrian Warkocz: The most essential part of working in a software house is that the projects are constantly changing. We have a well-established framework that allows us to adjust psychologically to a new challenge. We can assume that here is the beginning, these are our goals, we can see where our role in the project will end. It is not always the case that we create a project from scratch but we have a certain time frame on the horizon. There is a clearly marked start and finish, which makes the pursuit of milestones easier from a psychological perspective. If I work on a project for a long time and I start to feel that I would like to try something different, I can ask for a change, move to another project, and even completely change the technology.

Michał Sipiak: From my perspective, the biggest merit is that while working in the software house, you are in the position of business advisor. We cooperate closely with clients and that allows us to establish partnership relations. Therefore, we can directly suggest the best solutions for the product and client. We need to stay up-to-date with the newest solutions and trends. We need to use modern tools and follow what’s new on the market. That’s a great value for both the client and the employee. Technology is moving forward so fast, tools and trends change from year to year, and a software house seems to be the best place to keep up with these changes and not be left behind.

Who would you recommend working in a software house to?

Michał Sipiak: There is no one-size-fits-all recipe. For me, a software house is a place for people who value independence, enjoy working with clients and want to develop their own skills. Hierarchy is usually flat and your opinion matters. I think that’s also a place where you can grow faster. This is because we are able to change projects and technologies if we want. We are experts with diverse experiences with passion for constant learning and development. I believe that a software house is a place for people with a proactive attitude.

Adrian Warkocz: I value having an influence on what I do and to be able to change. I see a software house as a place for people who mind to be up-to-date with market changes and have an impact on the final project. My point of view also changed due to different experiences and pandemic situations. Therefore, a sense of belonging has become important to me. I’ve missed it elsewhere, and it was remote work and the conditions of the pandemic that drew my attention to this topic even more. That’s why I decided to come back to Espeo.

What was the main reason to come back to Espeo?

Adrian Warkocz: Software houses are not always structured the same way. During my career, I had experiences where I was sent directly to the client and had no ties to the company and didn’t feel comfortable. The method of managing the team and running the organization is important to me. At Espeo, I enjoy the flat structure and the fact that I know the status of the projects. If I do not like something, I can talk about it without embarrassment. I am confident that I will be listened to and that some action will be taken. Espeo is a specific place where you become a member of Crew, and you can build lasting relationships. Even after some time, there are still lots of my colleagues, and I’m happy to work with them again. 

Michał Sipiak: There is something in it. I would say that Espeo loves you for who you are. It does not try to change who you are to fit the company’s personality model. Therefore, you’re independent and you can guide your development. At Espeo, you can self-evaluate based on clearly defined guidelines. We all work towards the same goal. You can talk to everyone about everything without worrying about how it will affect your future career.

Interested in joining #EspeoCrew? Check out our open job positions and apply!

What’s your perspective on working in a product company?

Adrian Warkocz: Companies are very different. Usually, they have one specific product. Working in a product company is based on large projects that can last for years. You can change a certain scope of tasks but often the space for maneuver is smaller than in a software house. While you finish revision no. 2, there is revision no. 3, and sometimes you can feel like it’s a never-ending story. From a psychological perspective, you have to approach yourself differently not to lose your motivation. In my case, I saw that’s not a good career path for me. I don’t find myself in organizations where we face similar topics daily. For a person who doesn’t like a strong stabilization, burnout can happen quickly. 

Michał Sipiak: From my point of view, in a larger product company, it is difficult to offer new solutions and tools. Usually, they are already planned, purchased, and contracted for a long time. From an employee’s perspective, it is attractive to have well-known products on your CV. Additionally, working in a product company is stable. However, I see here a risk to constantly working on the same tools. Especially, specialization in a single technology or product poses a great risk – afterwards, it might be difficult to find a place in such a dynamic market.

Adrian Warkocz: There is also another point to consider. Product companies often have a larger budget because their product is designed for long service life. As a result, the hardware or software can be of the highest quality. They have funds for what software houses may not. In addition, there is more time to work on the project since the development pace is slower.

Michał Sipiak: Tools with expensive licenses – often such automation is a vicious circle. If the program does everything for us, the human becomes part of the process. After all, the software takes care of most of the work for us. The point I am trying to make is that it is dangerous to become a clicker in our market. It’s a bit like getting a driving license and getting into a Tesla… Would you be able to drive a classic car afterwards? In both cases you drive a car but it requires different driving skills. Generally, both ways have pros and cons.

Adrian Warkocz: My experience indicates that there is also a lot of conceptual work in product companies, which involves numerous discussions about product development. Is it an advantage or a disadvantage? It is a very individual matter. Some people like to figure out the subject conceptually before starting a typical technical work. However, I prefer the other side – more practical tasks than discussions.

To whom would you recommend working in a product company?

Michał Sipiak: I can share the experience I gained as part of an internal IT team at one big company. I had no contact with the client. The internal business was an actual client for us. So, that’s a big difference from working at a software house. Most often, you are part of a team with little influence on the final product. For that reason, product companies make a good place for people who like a stable environment. In addition, from my perspective, promotion in such companies is often influenced by many structured factors, and it takes longer.

Adrian Warkocz: When I moved from Espeo to a product company a few years ago, my colleague was leaving at the same time. Accidently, we even ended up in the same company. And this is the best example of how different people find themselves in different places. He appreciates stability, working on the same product, knowing what awaits him in six months, a year, and beyond. I have opposite needs. For me, it is important to have the perspective of change. I need to know that I can move forward and face various challenges. Moreover, I need to know that I can make an impact on the product.

Michał Sipiak: To sum up, if someone is interested in stabilization, a product company is an excellent opportunity. For some people that can be the best solution.

What is the client perspective?

The type of organization influences the characteristics of experts inside the organization. As a client or project owner, it’s valuable to see the point of your developers. Right people are a success factor of every project. Therefore, that’s a reason to consider the differences and potential advantages. How it’s to develop a particular digital solution with a software house and within an internal team? That’s a question to ask yourself before starting the project.

Karolina Fras, Employer Branding Leader

Adrian Warkocz: A software house is primarily a group of people who have various experiences and are valuable advisors for the client in product development. People who work in software houses have the ability to look at the product with an “out of the box” mindset. Also, they are up-to-date with technologies and novelties. While testing a new product, it is also much easier to scale the team and reduce it while seeing that it’s not meeting the business needs. In that case, working with a software house is more cost-effective and easier from the organizational perspective.

Michał Sipiak: From my point of view, expertise and consulting knowledge are top values. As a client, you hire a software house with experienced specialists. You describe the project, and you get solutions that tell you how to achieve it in the best way, taking your needs and capabilities into account. I disagree with this simple scaling as a larger value. Scaling up and completing projects quickly are the characteristics of contract workers, and I see the differences between software house experts and contractors.

Software house vs product company: summary

The best summary of our conversation will be the question that I asked my colleagues at the end. “How do you see your professional future?” Probably many people wondered about the answer while preparing for the interview. In practice, both Adrian and Michał have not got such a question yet. Why? I think their answers speak for themselves. After a moment of reflection, they both admitted it was impossible to predict how the industry will change in 2 years. What they would now indicate as a dream project or technology may soon be overshadowed.

What is the current perspective after coming back to Espeo?

At the moment, Adrian wants to develop mobile technologies and leadership competencies. Michał, in turn, wants to create code and learn about new technologies. They both mentioned that thanks to the variety of projects, they have a chance to stay up-to-date, which is their priority. Therefore, that was the main reason for their return to work at a software house.

Through years of experience in various organizations, they have concluded that the priority is to stay current with the market trends. From their perspective, they can achieve it in a software house. Moreover, in their eyes, such working and development conditions make a software house an excellent business partner for clients. Here they can find the most experienced and versatile specialists who will take on the role of a business consultant to implement innovative and complex ideas.

Does it mean that Software House is a perfect place to work for everyone?

There is no golden meaning for everyone. Everyone should identify their priorities. Then choose the best space to realize them. In the case of Adrian and Michał, this place is a software house. For others that could be a product company, project outsourcing company, or freelancing may be a perfect choice.

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Blockchain Public Technology

Blockchain and government regulators. Will they live happily ever after?

In the following article, we want to give a brief recap of recent developments in the regulatory area of the blockchain space. We will lay down the main events that have taken place, identify trends that are emerging from them, and based on this analysis try to speculate about the future of blockchain.

Main takeaways

  • Regulators are actively investigating different areas of blockchain space including exchanges, stablecoins, cryptocurrency transactions, mining processes, and tokens status.
  • Legal frameworks are proposed to regulate the dynamically growing crypto markets.
  • Developing countries tend to ban cryptocurrencies, whereas developed countries are investigating the possibility of partially embracing them.
  • Diem, a cryptocurrency with close ties to Meta (previously known as Facebook), failed due to federal government regulatory pressure.
  • All major economies are on track to issue their own government-backed currencies.

Introduction to blockchain and cryptocurrency regulation

Currently, the words “blockchain” and “crypto” are associated in our society with a wide range of, sometimes opposing, emotions. Yet, despite the fact that we are struggling to balance our excitement and fear, trust and suspicion, urge to evangelize and contempt, we can no longer ignore the fact that the genie is out of the bottle. Especially, if its capitalization is around 2 trillion dollars USD.

As crypto has reached this cap in an extremely short period of time, it caught the attention of governing bodies that seem to feel a sense of unease with this phenomenon. The tension between the crypto industry and government regulators reached the point where actions, sometimes drastic, are taken and the very existence of this market is at stake. For instance, Diem, a blockchain project that started at Facebook, has been recently closed by the United States government as “ it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead ”.

Cryptocurrencies, laws and regulations – what is the reason for the tension?

We will start this overview with an answer to the question of why there is tension between regulators and the crypto industry in the first place. The simple response is that it is a matter of value hierarchy.

Governments tend to prefer stability over growth. They impose this inclination by regulating the activities of intermediaries which in turn offer their services and products to clients. To protect customers even more, the intermediaries usually have a duty to be transparent and substantially backed by authorities in order to eliminate i.e. risk of money laundering.

As a result, trust and security are built in a series of steps between government and market agents. On the other hand, the crypto industry at its very heart chooses growth over stability. This goal is achieved by removing the intermediaries and putting the trust in hands of cryptographic algorithms. As a consequence, retail investors are less protected, yet they are rewarded for this risk with greater returns and lower fees.

Moreover, a sense of privacy is created as transaction agents are not obligated to be transparent. Finding a middle ground between described oppositions is and will be not an easy task. Regulators differ in their strategies for finding a solution. Some, like for example the government of El Salvador, are embracing cryptocurrencies with all their pros and cons, while others like China or Russia are banning them. In sum, currently, the regulatory pressure on cryptocurrencies can be observed in the following areas:

  • Cryptocurrency exchanges
  • Stablecoins
  • Customer safety
  • Status of cryptocurrencies (what kind of assets are they)

El Salvador – a decentralized future?

El Salvador is the first country in the world to adopt Bitcoin as a legal tender. This sentence is the summary of an almost year-long story that is still unfolding.

If we briefly check Wikipedia, we will learn that this country located in Central America has a population of around 6.8 million people and before the enactment of Bitcoin Law, it was using the US dollar as a national currency. Importantly, a large part of the country’s population lives abroad and sends money back to El Salvador.

These transfers could constitute even 20% of the country’s GDP and are subjected to substantial transaction fees. Moreover, a significant number of citizens do not have a bank account. These factors could make using a cryptocurrency like Bitcoin an interesting choice. El Salvador made a bold move by adopting this concept.

Here is the list of the main events that are shaping the economic future of this country:

United States of America – stablecoins and the financial system

It wouldn’t be an overstatement to say that the fate of blockchain technologies will be largely decided by the US regulators.

Although slow in investigating digital money at the beginning, recently both public institutions and the financial services industry, started to examine the cryptocurrency space and possible financial products based on blockchain technology at a faster pace in order to allow the safe adoption of cryptocurrencies. We would like to highlight the following events:

S&P Indices are commonly used as a proxy to measure Wall Street sentiment and by extension the whole US market. Creating indices for cryptocurrencies and including them in a separate and distinct asset class is an important statement that will definitely help to legitimize the technology.

We live in the era of investments based on Exchange Traded Funds (ETFs), with their ease of investing, and usually low fees they seem to be a perfect vehicle for modern portfolio creation.

Thus, with the advent of the first ETF that has a link to cryptocurrency a window of opportunities has been unlocked. It is important to stress, however, that the described ETF does not hold Bitcoin per se, but invests in Bitcoin future contracts.

  • A new regulatory framework for cryptocurrencies has been proposed during the congress hearing

The congress crypto hearing has brought to the community a level of excitement that has not been seen since the memorable hearing of Big Tech CEOs on disinformation.

During this important meeting, a new regulatory framework was proposed by Coinbase Chief Financial Officer Alesia Haas. It has been named Digital Asset Policy Proposal (dApp) and is based on four principles, called pillars, that we will quote:
“Pilar one: Regulate digital assets under a separate framework
Pilar two: Designate one regulator for digital assets markets
Pilar three: Protect and empower holders of digital assets
Pilar four: Promote interoperability and fair competition”

  • President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency presented a report on stablecoins

Stablecoins are the edge where the current financial system meets the crypto frontiers. As such, they are of particular importance to government regulators whose major responsibility is to stabilize the financial system.

In the long-awaited report, regulators insist that proper legislation needs to be put in place as the rapid growth of stablecoins could create systematic stress to the financial system. Three major suggestion has been made which we will quote:

  1. “Require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level. ”
  2. “Require custodial wallet providers to be subject to appropriate federal oversight.
  3. “Require stablecoin issuers to comply with activity restrictions that limit affiliation with commercial entities.”

If imposed, the requirements will regulate the stablecoins market in a tight manner similar to this that controls banks. For a more in-debt analysis, we suggest watching the video by Patric Boyle.

Currently, the Federal Reserve is investigating the possibility of creating a digital US dollar.

A report published by the Authors examines the current system of money and possible ways to include digital assets in this ecosystem. The analysis, surprisingly, concludes with a call-to-action to the general public. A set of 22 questions has been put forward with FED seeking comments and opinions about them from citizens till May.

Diem: a tale of a blockchain pipe dream

Poor Diem. Even the name of this digital currency has been a problem. Previously it has been known as Libra, yet under the pressure, the name has been changed to Diem.

It was supposed to be a set of stablecoins backed by the Diem Association which was a constellation of private companies that were willing to join the Diem ecosystem. Head winds were constant during the work on the project both from government regulators and technical sides.

Yet, it was the former that delivered the coup de grâce as stated in the final statement: “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. ”

The failure of this project could halt public blockchain development for years to come. If even a tech behemoth like Facebook has seen a regulatory setback so strong that the project had to be cancelled, then other companies are probably reconsidering their plans.

Soon after the announcement of the Diem cancellation Facebook shares plummeted by almost 27%.

United Kingdom – consumer protection comes first

The main event in the crypto space that has occurred in the United Kingdom (UK) with regard to the topic of the present post is a great example of regulatory pressure on the crypto exchanges.

Namely, The Financial Conduct Authority (FCA) has prohibited Binance, which is one of the biggest crypto exchanges in the world, from all “ regulated activities” in the UK. The reason for this action was the apparent failure of the company which governs Binance to become transparent about its structure and legal status (see section 2.5 of the First Supervisory Notice).

European Union – house of regulatory frameworks

The European Central Bank (EBC) started to examine the possibility of issuing its own digital currency. The investigation is set up to take 2 years and from the initial statement, we can conclude that many technological options are considered.

However, one of them is excluded from the very beginning. Namely, EBC is crystal clear that the “digital euro is not a crypto-asset or stablecoin”.

Developing economies: China, India, Russia

Here we present the review of important events related to digital currencies in developing countries:

Conclusion to blockchain laws and regulations

In sum, we have presented the origin of the conflict between cryptocurrencies and regulators, and the actions that are taken by them. Emerging patterns suggest that the period of hostility and mutual reluctance between regulators and the crypto space is ending in developing countries.

With the advent of proper legal frameworks and financial instruments (indices and ETFs), consumers and the financial industry will get protection and a way to structure their actions. As a result, an even greater volume of fiat money could flow to crypto boosting the liquidity and encouraging the development of more rich app ecosystems.

However, these gains will be made only if proper transparency (Binance case in the UK), and fruitful dialogue with regulators will be established (Diem case). Finally, it is important to note that all major economies are investigating the possibility of using government-backed currencies, with China leading the race.

Thus, we can conclude with a paraphrase of Warren Buffet’s metaphor, that the blockchain economic soil remains fertile even with, and thanks to, the interference of government regulators.

Disclaimer

The present blog post is for informational purposes only and is neither legal nor financial advice/statement. Cryptocurrencies are high-risk investments with the potential to lose all invested capital. Thus, before you make an investment consult proper authorities and perform due diligence.