• Overview
  • Services
  • Professionals

Paying and Playing in the Digital Realm: Cryptocurrencies, Contactless Payments, and Virtual Worlds
December 16, 2021
Next year will see the continued growth of digital or virtual currencies, payment options, investments, and real estate. 
Digital currencies have been around in some form for more than a couple decades. Many consider e-gold, which was introduced in the mid-1990s, to be the first form of electronic money. In the mid-2000s, M-PESA was launched, creating a way for unbanked people in Kenya to digitally transfer money throughout the country. It spread beyond Kenya and is still in use today. 
In 2008, someone using the pseudonym Satoshi Nakamoto released the Bitcoin whitepaper, ushering in the era of cryptocurrencies and popularizing the blockchain concept. Today, the popular website lists more than 8,000 such currencies. While many of these currencies likely never will catch on, several already have. The largest and most recognizable, Bitcoin, is estimated to be held by over 106 million people worldwide and to have more than 400,000 daily users. The number of companies that accept it as payment is continuing to grow and includes household names like Wikipedia, Microsoft, and AT&T. It also includes restaurants like Burger King, KFC, Pizza Hut, and Quiznos. It includes sports teams like the Miami Dolphins and the Dallas Mavericks. It even includes politicians from both sides of the aisle, like Republicans Cynthia Lummis and Rand Paul and Democrats Eric Swalwell and Darren Soto.
Bitcoin isn’t the only cryptocurrency that has been adopted. Ethereum, the second largest cryptocurrency, has seen its blockchain become the de facto standard for running smart contracts.
While the uninitiated and naysayers characterize the cryptocurrency world as a 21st century wild west, the truth is something far more tame. Rules that apply to traditional financial institutions, like Anti-Money Laundering ("AML") and Know Your Customer ("KYC") rules, have been applied to cryptocurrencies. Anyone wondering if these rules apply need to look no further than the arrest of the CEO and other executives of BitMEX, a cryptocurrency exchange that operated in the Seychelles (its CEO is rumored to have said it only costs a coconut to bribe somewhere there). They were arrested for refusing to comply with these rules, and their criminal trials are set for spring 2022.
More regulation of the cryptocurrency space likely is on the way. Within the past week, CEOs of several cryptocurrency companies testified in separate hearings before finance committees in both the U.S. Senate and House of Representatives. A theme of that testimony was the need for certainty in regulations.
The growth of digital currency is not limited to cryptocurrencies. Several projects have been underway recently to create an official digital currency for the U.S., and it isn’t alone. More than 100 countries are in some stage of developing an official digital currency (called a Central Bank Digital Currency). China seems to be leading the pack with its development of a digital yuan that it has already tested in multiple cities. Its hope is that Chinese nationals living abroad will help distribute the digital yuan worldwide, which some have predicted is part of China’s plan to replace the U.S. dollar as the world’s currency.
In addition to digital currencies, the way people shop and pay for goods will increasingly rely on digital, or contactless, payments. The pandemic hastened the adoption of contactless payments that already was underway. VISA’s recent Back to Business Survey interviewed small businesses and consumers in eight countries regarding their payment habits and preferences. The study showed that, almost overnight, consumers made COVID-19 safety measures their top priority. That translated into digital and contactless payments being a preferred option. Two-thirds of consumers (65 percent) in the survey stated they would prefer to use contactless payments more than they currently do. Nearly half (47 percent) of consumers stated they will not shop at a business that does not offer a contactless way to pay. 
These attitudes may be here to stay. Only 16 percent of consumers said they would revert to their old methods of payments after the pandemic is over. The small businesses that were surveyed are working to meet the consumers' changed attitudes. Over four-fifths (82 percent) of small businesses “had embraced new forms of digital technology to meet changing consumer behavior.” 
It is not all work in the digital realm. This past year showed that there’s interest in playing there, too. The popularity of non-fungible tokens, of NFTs, skyrocketed in 2021 when they captured unbelievable amounts of money at auctions. Broadly speaking, it is easiest to think of an NFT in this context as akin to a digital piece of art. One of the best examples from this past year is the sale at a Christie’s auction of the digital artist Beeple’s art piece Everydays for $69.3 million. Sports highlight clips, sports and television trading cards, and music clips all have been made into NFTs and offered for sale. They sometimes digitally reserve a royalty in the creator so that, every time an owner sells an NFT to a new owner (which happens electronically), a certain amount of the purchase price digitally, automatically, and instantaneously reverts back to the creator.
This year also saw a land rush in virtual worlds. Companies have created digital representations of cities, states, and countries, sometimes mimicking our own and sometimes fictional creations like “Genesis City” - a plot virtually about the size of Washington, D.C. This experiment caught on in a big way as people paid hundreds of thousands of dollars for pieces of virtual land. For example, a 1,100 square foot plot of Genesis City could run a purchaser about $200,000. Those are real dollars, and people are willing to pay it. Last month, a record sale was made when someone purchased a plot of virtual real estate for $2.4 million. Commentators predict next year will see an even bigger boom in this space. With those amounts of money being spent, it is not surprising to learn that virtual worlds already have seen disputes between neighbors as purchasers complain when an owner of a neighboring plot installs something undesirable. (One dispute arose when an owner installed a horse and cattle farm; another arose when an owner discovered that a neighbor installed a beach with its own waves that intruded onto his parcel.) These disputes already have led some to call for virtual zoning laws.
Our lives are becoming more digital. The way we shop, handle our money, see our health care professionals, interact with one another, and recreate increasingly are becoming digitalized. The areas discussed above are some of the ways we saw the digital realm make great strides in 2021, and we expect to see even more of the same in 2022.
Technology Nicholas P. Mooney II