OpinionAlternative LendingDigital BankingSavings and Investment
Cryptocurrencies are increasingly becoming an accepted part of the financial landscape with institutions now realising they must adopt them, writes Ivan Soto-Wright
Image source: Photo by Oleg Magni from Pexels
The global perception of cryptocurrency has shifted dramatically in recent years — once being seen as a fringe investment class, they are now known for having a multitude of use cases including in low-cost remittances, peer-to-peer lending, and high interest savings accounts.
With cryptocurrencies increasingly becoming an accepted part of the financial landscape, institutions are realising they must adopt this young asset-class, or risk losing relevance. Broadly speaking, I believe the reason for increased adoption amongst businesses can be split into the following three camps.
Surge in consumer popularity and understanding
Until very recently, only those with a strong understanding of the underlying technology felt comfortable participating in crypto in any meaningful way. However, as functionality and awareness has grown, so too has adoption and, in many instances, value.
This came to a climax last year, when — against the backdrop of macroeconomic uncertainty — Bitcoin’s explosive rise in price drew an enormous amount of attention from the press and public, making the year something of an inflection point in terms of global interest.
The recent surge in consumer interest can also be credited to prominent public figures endorsing cryptocurrencies, as well as firms such as Mastercard, Tesla and JP Morgan, all of whom have signalled strong interest in the space. Last month, Mastercard announced that it will “start supporting select cryptocurrencies” and create “more opportunities for shoppers and merchants…to transact in an entirely new form of payment.”
Around the same time, Tesla also announced that it will soon accept Bitcoin as payment (shortly after adding $1.5bn worth of BTC to its treasury). Naturally, these were widely viewed as endorsements for the idea that this emerging asset class will play a major part in disrupting the traditional financial system.
This heightened awareness has led to a surge in interest which, in turn, has put pressure on businesses to offer services allowing their users access to crypto.
Say if a consumer is looking for a new bank account – all other things being equal, are they going to choose the option that offers crypto exposure, or the one without? While not everyone will immediately want to explore the crypto space, we’re increasingly seeing that products and services that incorporate crypto are more attractive to consumers.
A focus on security and speed
One of the major benefits of blockchain technology is its ability to enforce systemic transparency, making it very difficult for fraud to go undetected. The open and decentralised nature of public blockchains means that transactions are tracked from start to finish, network-wide, removing any doubt around the provenance of funds, as well as removing the need for an intermediary. Additionally, chargebacks are technically impossible, as all transactions are final and immutable.
A key pain point for businesses operating within the traditional financial system is that money transfers typically take hours or days, are labour-intensive, and expensive. Blockchain technology can cut transaction times from days to seconds, and fees from dollars or even hundreds of dollars to fractions of a cent
For businesses in the financial services space, speed and safety are both paramount — yet they don’t often go hand-in-hand. For an industry that largely relies on outdated, slow and clunky legacy systems, the infrastructure that MoonPay and others offer can be a game-changer. Speed and costs can be lowered without compromises in security, all to the benefit of their users.
Access to emerging markets and trends
Given most cryptocurrencies are hosted on decentralised ledgers, users don’t need a traditional bank account to be able to access or engage with them — access is open. Many perhaps don’t see this as an important differentiation point in more developed economies like the U.K or U.S. where banking access is prevalent, but the reality is that an estimated 1.7 billion people are classed as ‘unbanked’ worldwide and don’t have the opportunities that we are so fortunate to have.
Crypto is fundamentally open and accessible, and as it becomes more mainstream, businesses can begin to offer much-needed services to markets that have previously been out of reach.
But crypto is more than just a way for businesses to enter new markets it also allows them to future-proof their offerings and increases agility in catering to emerging consumer trends. Recently, a number of entirely new types of marketplaces have emerged – a prime example being NFTs.
NFTs (non-fungible tokens) act as a digital certificate of ownership for any digital asset, such as a Tweet, piece of artwork, or an album, and have very quickly become something resembling a mainstream financial product. Businesses are already starting to cater to this surge in interest in the NFT space.
Taco Bell, for example, just had tremendous success with its ‘NFTacoBell’ collection of taco gifs, with prices reaching more than $3,600 per gif.In the art space, the first digital-only art auction by Christie’s sold its first digital piece of artwork for £50m — people are seeing real value in these digital products. Businesses that have been quick to integrate crypto offerings into their platforms have seen significant surges in revenue, while those that have been slower to adopt may, to some degree, be falling behind.
We’re on the precipice of a new financial age where crypto is a central pillar.
Businesses, large and small, have already started to embrace this new technology, engage with new markets, serve the needs of changing consumer mindsets and ultimately become more profitable. As is always the way, those who are slow on the uptake risk missing out in the long term.