While change is guaranteed, the scale and scope of this change is not. For the financial industry, blockchain – the technology behind Bitcoin (BTC), Ether (ETH), non-fungible tokens (NFT), and other digital assets – has brought us to a crossroads.
What will the future of money look like?
We have been operating on the front lines of crypto for 10 years, protecting large and small investors while allowing them to invest in this exciting new frontier of finance. The experience we have gained here helps us see what lies ahead.
In this historic period, a myriad of outcomes are possible, but one thing is certain: the efficiency and innovation of technology will influence far beyond traditional financial sectors.
The mature digital asset industry is coming
Blockchain offers a faster, more efficient and more secure structure for financial transactions compared to the contracts, transactions and records that currently define our economic, legal and political systems. Harvard Business Review puts it succinctly with this comparison: “[The old financial structures] are like rush hour traffic jams trapping a Formula 1 race car. In a digital world, the way we regulate and maintain administrative control must change. “
From generation to generation, technologies have updated the way we conduct financial transactions. The modern credit card has been around since the late 1950s, the first proper internet sale was made in 1994, PayPal was founded in 1998 and went public and was sold to eBay in 2002, and Satoshi Nakamoto started the blockchain revolution in 2008. Today, the heavyweights of finance are no longer on the sidelines. And 55 of the world’s top 100 banks have some form of exposure to this new technology.
The first international regulations were enacted in Japan in 2016 after hacks against crypto exchanges, including a theft of 850,000 BTC against Mt. Gox. Since the success of any financial market depends on the predictability, safety and overall efficiency of the market, regulators continue to consider the direction and viability of their involvement in cryptocurrencies.
Related: Will regulation adapt to crypto or crypto to regulation? Expert response
Regulators and businesses want to make sure investors have certain protections in any market – digital or otherwise – to spark participation. Think of the Federal Deposit Insurance Corporation (FDIC) for US banks or eBay’s money-back guarantee. Without regulation, market participants can be exposed to long and short term risks.
Regulators also ensure that markets play with an equal set of rules. As Commodity Futures Trading Commission (CFTC) Commissioner Dan Berkovitz said in June:
“It is untenable to allow an unregulated and unlicensed derivatives market to compete side by side with a fully regulated and licensed derivatives market. “
And, most importantly, it’s not just regulators and governments that will decide the future – it’s about us, investors, leaders, and the consumer at large – deciding how we want to use digital assets in the future. ‘to come up.
An evolving language for useful digital assets
As the market matures, the cryptocurrency industry will also experience a language shift. Regulation and widespread adoption will change the way the media and the public perceive and talk about digital assets.
Crypto will retain its uniqueness as it matures – don’t expect the HODL, FUD, and ‘to the moon’ talk to go away – but it is essential that a larger cohort of blockchain investors feels comfortable in the space.
It may seem like a small thing, but the focus on merging the languages of crypto and institutional finance has enabled us over the past 10 years to work with a range of institutions ranging from neobanks, fintechs and brokers to banks, hedge funds and family offices.
The evolution of the language is happening in tandem with larger investors seeing the long-term value of blockchain proven over time as they begin to diversify major holdings to include crypto, thus increasing the association between these. new assets and legacy assets that have held historic value – such as gold, bonds, or central bank-backed fiat.
In business, you are judged by the company you keep, so we won’t get that “warm embrace” without adopting the language of financial services and regulators more broadly.
Still, it’s not unreasonable to imagine valuing crypto as a commodity rather than a digital currency – US Federal Reserve Chairman Jerome Powell told Congress in 2019 that Bitcoin was a “speculative store of value. Like gold. But Bitcoin isn’t the whole story, just the most talked about. The industry needs to stop focusing on one particular use case for technology and start talking more about money, investing, financial management, and smart payments.
Related: Blockchain technology can change the world, and not just through crypto
Industry is bigger than any token
We have discovered over the past 10 years that clients are increasingly drawn to assets that are useful and capable of solving complex problems.
Different digital currencies have different use cases. For example:
- Tether (USDT) would work well to pay wages because it is pegged – tied – to US dollars, thus avoiding Bitcoin’s volatility.
- Brave’s Basic Attention Token (BAT) is leading the way for the future of online content by issuing payments, in BAT, to users of its browser for viewing ads. These users can then tip anyone on the internet using the BAT in their digital wallet.
- And the Audius Governance Token (AUDIO) makes a compelling case for crypto to play a bigger role in the future of the music industry, providing security, exclusive access to features, and community governance for artists and fans.
Blockchain is all about solving problems, not taking over the world, replacing fiat or banks, a common misconception among the general public. While BTC may be the most recognizable digital asset, because it is recognized and arrived first, it is only one class of asset among many.
So what does the future look like?
Congress opened the doors for regulators earlier this year when the Senate passed an infrastructure bill that contained an amendment bringing new scrutiny to the crypto industry.
Investors, digital asset exchanges, smart technologists, government officials, regulators and everyone else will benefit from a more mature market that protects its consumers and values transparency, predictability, and honest communication. Likewise, the majority benefit from clarity on which digital assets hold real value and which exist as manipulative tools to make the rich rich.
We’ve been there from the start and we’ve seen the ebb and flow of trends. But we’ve also seen that what ultimately survives are always brilliant ideas that solve the emerging issues of our time.
Yes, the change is here. The mature digital asset industry has started to emerge in recent years, bringing with it a synergy of language that has become more sophisticated and has invited a larger audience to our table. The assets and knowledge that this new audience brings, in turn, will bring great confidence in all sectors. This trust will lead to the adoption of blockchain technology to solve problems that no one ever dreamed could be solved with blockchain.
This article does not contain any investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.
The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Julien sawyer is the CEO of Bitstamp and is in charge of the overall strategy and vision of the company. Julian brings 30 years of financial services and advisory experience, as well as hands-on experience building financial companies from scratch.