NFT, ETF, IA, RV, WEB3 … 2022 is presented with a set of acronyms for different uses and digital strategies that, loaded with promise, have helped the stock market to reach historical records and have established strong optimism in the discourse of many politicians. But the materialization of each promise does not only depend on technological aspects. And what is difficult to foresee today is not the technological viability, but the economic impact of each initiative, which is constantly changing and conditioned by how each of the pursued projects is undertaken, promoted, governed and regulated.
Among experts from multiple disciplines there is a growing recognition of this uncertainty, with the only certainty of which three key questions should guide the analysis and development of each initiative. What value will it bring? What costs will you incur? And how will your profits and losses be distributed? To illustrate the complexity in costs, let's take ETFs (Exchange Traded Funds) as an example, an exchange instrument with which retailers can invest and divest in indices and mutual funds with one click of an app. A strong gain in efficiency, but one that may hide potential social costs with the entry of low-educated investors driven more by fashions than by a clear understanding of the risk they incur. A fear endorsed by the complex products included in certain funds, such as exotic derivatives or WEB3 (or decentralized web) offers, which include everything from cryptocurrencies to artistic works in NFT format (Non-Fungible Tokens).
To these potential social costs are added possible costs to financial stability, a product of the growing role of investors acting in droves and of an active management of funds that relies more and more on artificial intelligence blind to systemic risks. Other costs — to democracy, autonomy, mental health, the environment — are also part of this important discussion. An additional issue difficult to resolve will be the distributive. As an example, virtual reality, the gateway to Mark Zuckerberg's “metaverses”. More than science fiction, they are “super platforms” that aspire to manage access to all actions of their users (shopping, reading, entertainment and information), together with social, financial and professional interactions. Something that WeChat already achieved in China. But, how to prevent the concentration of wealth and power in a few countries, firms or individuals?
2022 has to be a year of gradual progress so that certainties are abandoned and a host of increasingly precise and pertinent questions are given way. Identifying and addressing them correctly will determine whether this alphabet soup reinforces our weakened productivity or causes us to become poisoned again.
Alejandro Neut, from BBVA Research
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