Crypto is well known for offering people the opportunity for explosive gains. Due to its volatile nature, the value of a particular token can increase dramatically in a short period, attracting risk-seeking or risk-tolerant investors. There is of course more to crypto than speculation.
What drew me into crypto, and indeed Coinbase, was the mantra that crypto offers financial freedom. You only need to have a phone, and you can access and control your assets, funds, cash, or crypto without needing the permission of a third party intermediary.
The potential for crypto to scale globally and give historically ignored and unbanked communities access to finance was an aspiration I couldn’t resist. While we’re not fully there yet, real-world examples are emerging such as Venezuelans turning to digital assets as a means to hedge against hyperinflation. Financial institutions have also recognized crypto’s utility, leading to its widespread adoption across the sector.
From Grassroots Innovation to Institutional Integration
To state the point more clearly, cryptocurrency was initially developed to address the needs of everyday consumers, it has now been adopted by financial institutions in order for these businesses to reap the benefits crypto offers to their operations, and maintain market share in response to consumer demand for crypto investments.
For example, Bitcoin served as a decentralized store of value due to concerns about fiat currency inflation, a decade or so later, multiple banks now offer Bitcoin ETFs. Another example of how financial institutions are adopting crypto and blockchain, is demonstrated by BlackRock’s exploration of the tokenization of financial assets. There’s even discussions about company-specific tokens. Amazon and Walmart are considering issuing their own stablecoin in order to avoid swipe fees incurred on credit and debit cards.
There are plenty of examples demonstrating that blockchain technology is poised to continue its significant role in finance. See the examples below.
- Cross-Border Payments: Many banks, including JPMorgan Chase and HSBC, are using blockchain to speed up cross-border payments. Why keep unnecessary and relatively expensive intermediaries when you don’t have to?
- Interbank Communication: JPMorgan’s Liink network is a well-known example of a private, permissioned blockchain that facilitates secure information exchange among over 400 financial institutions.
- Trade Finance: Financial giants like HSBC (Contour Platform) are using blockchain to create a shared digital ledger to track trade transactions in real-time, which helps to reduce fraud and manual errors, and more importantly make a historically complex and paper-based process simple and efficient.
Where TradFi Meets DeFi
The conclusion is clear: the utility of crypto and more specifically, blockchain in financial transactions, and communications has already been cemented. With greater institutional adoption will come more opportunities to leverage the efficiency of these tools to replace outdated systems, and continue solving real-world problems.
Take Mastercard’s stablecoin settlements. Mastercard is actively integrating stablecoins into its global payments network, creating a bridge between traditional finance and the crypto ecosystem. Mastercard has partnered with Circle, issuer of the USDC stablecoin, to allow acquiring banks and merchants in certain regions (like Eastern Europe, the Middle East, and Africa) to settle transactions using USDC. This initiative reduces global payment processing friction, increasing cost efficiency and global access.
Looking forward, it is likely that the current demarcation we have between TradFi and DeFi will no longer exist. Per the examples above, each side is adopting the benefits that the other offers. We have institutions like MasterCard, HSBC and BlackRock integrating, implementing and adopting crypto trading and blockchain technology benefits, and you have crypto trading platforms, like Uphold, offering neobanking features like our Interest Account. The future is the best of both worlds; ripe with choices. I don’t want to be restricted to just trading or investing in crypto, nor do I want to miss out on the potential of crypto gains, and technology. Mass adoption isn’t going to occur in silos, it will reach its potential once we’re all embracing the very real benefits that blockchain can provide.