While changes are guaranteed, the scope and extent of those changes are not. For the financial industry, blockchain – the technology underlying Bitcoin (BTC), Ether (ETH), non-fungible tokens (NFTs), and other digital assets – has brought us to a crossroads.
What does the future of money look like?
We have been at the forefront of cryptocurrency for the past 10 years, protecting large and small investors alike while enabling them to invest in this exciting new frontier in the financial world. The experience we’ve gained here helps us see what’s coming on the road.
Innumerable outcomes are possible in this historic period, but one thing is certain: the effectiveness and innovation of technology will impact far beyond traditional financial sectors.
The mature digital asset industry is coming
Blockchain provides 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 put it in a nutshell with this parable: “[The old financial structures] are like a traffic collapse that locks up a Formula 1 racing car. In a digital world, the way we regulate and maintain administrative control must change. “
From generation to generation, technology has updated the way we conduct financial transactions. The modern credit card has been around since the late 1950s, the first real online sale was completed in 1994, PayPal was founded and went public in 1998 and was sold on eBay in 2002, and Satoshi Nakamoto started the blockchain revolution in 2008. Financial heavyweights are no longer on the sidelines today. And 55 of the 100 largest banks in the world are exposed to this novel technology in some way.
The first international regulations were enacted in Japan in 2016 following hacks against crypto exchanges, including an 850,000 BTC theft against Mt. Gox. With the success of any financial market based on predictability, security, and overall market efficiency, regulators continue to think about the direction and viability of their exposure to cryptocurrencies.
Related: Will regulation on crypto or crypto adapt to regulation? Experts answer
Regulators and corporations want to ensure that investors in any market – digital or otherwise – enjoy some protection to encourage participation. Think 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.
The regulators also ensure that the markets play by the same rules. Commodity Futures Trading Commission (CFTC) commissioner Dan Berkovitz said in June:
“It is untenable that an unregulated, unlicensed derivatives market can 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, executives, and the general consumer – to decide how we want to use digital assets in the future.
Evolving language for useful digital assets
As the market matures, the cryptocurrency industry will also experience language evolution. Regulation and widespread adoption will change the way the media and the public perceive and talk about digital assets.
Crypto will retain its unique character as it matures – don’t expect the conversations of HODL, FUD, and “to the moon” to go away – but it’s critical that a wider cohort of blockchain investors feel comfortable in this space .
It may seem like a small thing, but attention to the convergence of the languages of crypto and institutional finance has allowed us over the past 10 years to work with a range of institutions, from neo banks, fintechs and brokers to banks, hedge funds and Family offices.
The language evolves in parallel with more and more major investors seeing the long-term value of the blockchain proven over time as they begin to diversify key holdings around crypto, thereby creating the link between these new assets and the legacy assets that have historical value like gold, bonds, or central bank-backed fiat.
In business, you are judged by the company you run, so we won’t get that “warm hug” without broader embracing the language of financial services and regulators.
That said, it’s not unreasonable to think of crypto as a commodity rather than a digital currency – 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 the technology and talk more about money, investing, financial management, and smart payments.
Related: Blockchain technology can change the world, and not just through crypto
The industry is bigger than any token
We have found over the past 10 years that customers are increasingly drawn to assets that have utility and can solve complex problems.
Different digital currencies have different use cases. For example:
- Tether (USDT) would work well for paying salaries as it is pegged – tied – to the US dollar, thus avoiding Bitcoin’s volatility.
- Brave’s Basic Attention Token (BAT) is setting a course for the future of online content by issuing payments in BAT to the 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) is a compelling argument that crypto will play a bigger role in the future of the music industry, as it offers artists and fans security, exclusive access to functions and community-owned governance.
Blockchain is about solving problems, not conquering the world, replacing fiat or banks, a common misconception among the public. While BTC may be the most famous digital asset because it has a name and got there first, it’s just one asset class among many.
So what does the future look like?
Congress opened the doors to regulators earlier this year when the Senate passed an infrastructure bill that included an amendment that would give the crypto industry new control.
Investors, digital asset exchanges, smart technologists, government officials, regulators, and everyone in between will benefit from a more mature marketplace that protects its consumers and values transparency, predictability, and honest communication. Likewise, the majority will benefit from the clarity of which digital assets have real value and which exist as manipulative tools to make the rich richer.
We have been there from the start and have seen the ups and downs of the trends. But we have also seen that at the end of the day there are always brilliant ideas that solve the problems of our time that arise.
Yes, there is change. In recent years, a mature digital asset industry has emerged, bringing more sophisticated language synergy and inviting a wider audience to our table. The benefits and insights that this new audience brings will, in turn, create great trust across industries. That trust will lead to the adoption of blockchain technology to solve problems that no one ever dreamed could be addressed with blockchain.
This article does not provide investment advice or recommendations. Every step of investing and trading involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect the views and opinions of Cointelegraph.
Julian Sawyer is CEO of Bitstamp and responsible for the company’s overall strategy and vision. Julian brings 30 years of financial services and advisory experience as well as hands-on experience building financial companies from the ground up.