Financial products we’d rather not see in 2022


Hands holding a tablet are pictured during a tour through the urban NFT LAB called ‘GAME OVER’ by artist group Die Dixons (aka XI DE SIGN) in Berlin, Germany October 6, 2021. REUTERS/Annegret Hilse/File Photo

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NEW YORK, Jan 4 (Reuters Breakingviews) – In a merger of 2021 buzzwords, Breakingviews is preparing a new digital asset trading platform based on the metaverse, buy now, pay later. If that’s too much to swallow, here are a few other unlikely — if sadly not impossible — financial product innovations that could emerge in the coming year.

First, how about combining blank check companies with non-fungible tokens? NFTs are digital certificates that share technology with cryptocurrencies, but are unique rather than interchangeable. They can be used, among other things, to authenticate ownership of digital assets. They’re also all the rage to know more, perhaps explaining why movie theater chain AMC Entertainment (AMC.N), whose shares jumped more than 1,000% in 2021 through mid-December on interest from social media is propose an NFT to self-identified shareholders of the company.

Public offerings by special-purpose acquisition companies, which raise funds to buy other businesses, hit a record pace in early 2021 but have since been met with indigestion and investor skepticism. They usually give out warrants when they issue stocks like a carrot for investing. Adding AMC-like NFTs as well – tradable, crypto proof that “I own this SPAC” – could be just the ticket to reinvigorate the market.

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Robinhood Markets (HOOD.O), the stock and crypto trading platform that went public in July, also made headlines last year. One controversy that has helped drag its shares down since then is its revenue model, dominated by the so-called payment for order flow, or PFOF. This means that market makers pay Robinhood to direct stock trades to execution.

How could commercial enterprises replace this income? Newbie cryptocurrency enthusiasts who don’t want to lose sleep at night might want an account where their dollars are turned into bitcoins or ether every morning and dollars every afternoon. They collected the inexorable, didn’t they? – daily gains on cryptocurrency, while the brokerage could collect fees on these exchanges and avoid PFOF taint.

A third practical financial product idea in 2022 is what might be called the Tech Triple 12 ETF. Cathie Wood’s ARK Investment Management’s actively managed technology exchange-traded funds have been making waves in 2021. Passive ETFs can also be closely tailored to specific stock characteristics. In exchange for a commission, it would only bet on technology companies with a market worth more than $3 trillion. As you read this, a business may qualify to learn more.

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(This is a Breakingviews prediction for 2022. To see more of our predictions, click here.)

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Editing by Rob Cox, Sharon Lam and Amanda Gomez

Reuters Breakingviews is the world’s leading source of financial news on the agenda. As the Reuters brand for financial commentary, we dissect big business and economic stories as they break out around the world every day. A global team of approximately 30 correspondents in New York, London, Hong Kong and other major cities provide expert analysis in real time.

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