Cryptocurrencies are a huge hot topic in the world of financial services and it’s garnering interest from around the world. From 2015 until today the number of people using crypto is very similar to the number of internet users from 1998 until 2005. If the same rate of adoption continues, there are likely to be a billion crypto users before the decade is out.
There are a good (and growing) number of crypto enthusiasts—and perhaps at least as many sceptics—but the majority of people have no strong opinion one way or the other. Crypto’s success depends on winning those people over and building trust. But it’s fair to say that crypto has a chequered history, even its relatively short lifespan to date. The big question is whether enough trust can be built for cryptocurrencies to really take off and go mainstream…?
Off to a bad start
Cryptocurrencies have historically been famous for hacks and scams. From organised scams and ponzi schemes run by criminals and, allegedly, the mafia, there is a distinctly shadier side to crypto which has been well publicised.
Add to this the volatility of cryptocurrencies and the bad press that attracts, it’s easy to see why there’s a lot of hesitation and a raft of questions about the value that crypto can actually offer to society.
There is perhaps also a perception that cryptocurrencies are much more at risk of cyberattack. While hackers are getting incredibly sophisticated, there are now also a lot of excellent cybersecurity tools. Many crypto platforms who have been hacked could have done much better in protecting their data – they just didn’t put the effort or investment in to make sure their customers were protected.
There are of course some bad crypto companies – those deliberately set up to defraud people. There are also some who perhaps shouldn’t have been able to raise the money they did. But this is true of many different business types. The difference is that without proper regulation or accountability, many of these crimes or misrepresented businesses have not had to suffer any real consequences.
Turning the tide of trust?
The old saying ‘mud sticks’ is certainly true of cryptocurrencies, but it’s important to note that it’s often the bad side of innovation that people remember most – and there’s a lot more to crypto than that. So, can it throw off these negative associations and build a more positive outlook?
In the last few years, institutional level security platforms have become more robust and you can even get insurance for digital assets. In short, there are many tools and technologies now available that can make crypto more secure and more trusted.
One really positive move in the UK is the initiative taken by the FCA to create a better regulatory environment to foster safer innovation in the crypto space. In general, crypto businesses actually want to be regulated – over a hundred crypto businesses signed up to the FCA’s register – something that wasn’t a necessity for them, but a choice.
Regulation will drive trust, and trust is something crypto needs to gain consumer confidence and mainstream acceptance. Crypto businesses are keen to be able to say that they follow FCA guidelines, and many were confident that they would be able to meet the requirements being set out.
The FCA should be commended for trying to move the needle—and it’s important to remember the body is one of only a few to take these proactive steps. Where other jurisdictions have simply banned crypto or ignored it, the FCA is actively engaging with the industry. However, the pioneering regulatory environment necessary for crypto isn’t going to happen overnight, so it’s not a short-term or single-handed fix for the trust and security issues faced by the industry.
A world of opportunity
By 2025 analysts estimate the blockchain market alone will be worth around $40bn. There is already huge growth in the number of exchanges and software providers servicing both crypto and fiat currencies—the next step is to build the technology infrastructure that bridges the gap between everyday spend and digital assets. We’re already seeing the demand from people who want to spend their crypto with retailers as opposed to having to trade out or sell assets to enable this. Tribe is working with a number of large crypto exchanges to power payment capabilities
There are many more use cases that can help turn crypto from the villain to the hero of the financial world. Crypto offers the ability to send digital money instantly, for free, across borders – something that is innately valuable. This also opens up a lot of opportunities for people around the world that may struggle to rely on traditional banking infrastructure.
There’s also the opportunity for crypto companies to connect up banking payments and current account-type facilities, offering a truly modern experience for their customers. Adding banking payments not only means that crypto companies can save on acquiring fees, they can also create stickier customer relationships—it’s one more step towards the simple “one-click” experience that consumers are used to.
The potential of cryptocurrency is that it will offer choice, that people will be able to personalise and choose how their money and assets work for them. For instance, it can make high speed international remittances simple and near-instant, large transactions safe, and combinations of fiat currency, digital assets, and cryptocurrency straightforward. It can enable people to easily send micropayments that can’t be done cost effectively through other means.
But we need to build towards this future, creating new crypto enthusiasts as we go. Crypto companies need to be more robust in testing their own security and making sure they are keeping their crypto/data as secure and protected as possible. We have to provide education for those who are interested in crypto, so they can make more informed (and safer) decisions, rather than just listening to skewed social media hype.
Building trusted brands, relatable use cases and continuing to build simple, secure experiences will also be key to this, along with, inevitably, regulation of the sector. It’s a very similar journey to the one that fintech and financial services have been (are still) on. Within the fintech industry, we often debate the premise that banks retain the trust of the consumer, so how do fintechs break through? The same principle applies to crypto. With fintech doing so through superior product offering and digitisation, this roadmap seems apt and therefore why we strongly believe in its inevitable success.