The Crypto Forecast for Fast-Growing Fintechs: Driving Mainstream Adoption in 2021
We’ve reached an inflection point in the institutional and retail understanding of cryptocurrency — its technology, its value, and its uses — where mass adoption is seemingly inevitable. The train has left the station and the way we understand money and finance could all be changing before our eyes. The only thing left up for debate is how far down the tracks the figurative train has traveled.
In our latest webinar, we heard from a panel of cryptocurrency economy and technology experts from Chainalysis, Blockchain.com, and Paxos. In this blog post, we’ll discuss the lay of the land in crypto today, key takeaways from our panel of experts, and the three major challenges to consumer adoption in this new financial frontier.
What’s the Deal with Crypto, Anyway?
Any conversation about the evolution of cryptocurrency must be rooted in its rapid acceptance as a store of value — meaning the asset is stable enough to not depreciate rapidly. Bitcoin is the most popular and most impactful of the cryptocurrencies, and it’s well on its way to becoming a legitimate store of value.
“The narrative that has emerged is: perhaps Bitcoin is a better gold. It’s a fungible money. It’s portable. It’s durable. It’s divisible. It’s programmable (machine can talk to machine),” said Mike Dudas, VP Business Development at Paxos. “Today, at scale, it’s being used as a store of value. It’s non-sovereign and censorship resistant. Non-government money is a really powerful concept.”
So, what is holding cryptocurrency back from mass adoption? Some may argue we are accelerating rapidly towards mass adoption already and it’s clear our panelists would agree. There will be bumps along the road though, namely regulatory uncertainty, scaling challenges due to some of the underlying technology, and consumer (both institutional and retail) readiness.
Bitcoin is Ready for the Big Leagues
Bitcoin is now establishing itself as more than a curiosity. It’s a proven network with adoption increasing among legitimate financial institutions, corporations, and retail investors. In just the last few months, companies and institutions like Tesla, PayPal, Visa, Venmo, MassMutual, Square, and so many more have made significant moves to either invest in, accept as payment, or enter crypto/blockchain markets.
Jason Karsh of Blockchain.com judged the mainstream adoption of Bitcoin, specifically, by what he called the “uncle score”: “Are your uncles and aunts coming to you and asking how they can get Bitcoin?”
There are three key areas of emphasis that fintechs looking to enter the cryptocurrency space should consider as the world heads towards mass adoption.
- An educated consumer is your best consumer
So, your “uncle” is interested in buying some Bitcoin and needs your help to do it. But, does he really understand what cryptocurrency and the blockchain are? As cryptocurrency awareness and adoption makes its way further into the mainstream, educating consumers is going to be the biggest issue that fintechs will face.
Coinbase, the crypto-exchange platform that recently filed an IPO, for example, incentivizes users to participate in education programs. In exchange for watching a video and taking a quiz, Coinbase will pay their users small amounts of new and upcoming cryptocurrencies.
Bitcoin has become synonymous with the term “cryptocurrency” but there are so many others that are gaining traction and legitimacy. Ethereum, the world’s second largest coin by market cap, is actually the world’s most actively used blockchain. While it’s much earlier in that coin’s lifecycle than Bitcoin, we’re seeing some incredible emergent use cases like NFTs. Doge Coin, while not believed to be a legitimate long-term investment by our panelists, has combined the world of finance and internet memes to further legitimize cryptocurrency speculation.
Jonathan Levin of Chainalysis encourages fintechs to get onboard before the train is too far away from the station, “Any fintech company with distribution has the ability to offer products to their customers to let them take advantage of this new asset class.”
WHAT THIS MEANS FOR FINTECHS: Make sure you’re delivering information, training, and providing education at the right moment in the consumer journey.
2. Seamless onboarding is mandatory
Onboarding is one of the most difficult hurdles to clear for fintech apps. More than other industries, consumers place an enormous amount of trust in fintechs to hold their information securely. Due to evolving regulatory requirements in the space, fintechs that have already had to gather typical KYC materials have to ask their consumers for additional information.
That being said, as regulation becomes more clear and as interest in cryptocurrency transitions from speculative investment to wide acceptance, the surrounding doubts are receding. According to our panel, it is a misnomer that cryptocurrency is unregulated today. We will see increased regulations about how assets are used rather than the tech itself.
“The ability to buy bitcoin or engage in the Ethereum economy has become so much simpler. What we’re seeing now is the premise upon which people build distribution,” says Levin. “As distribution accelerates we’re going to get a much larger scale which will support us moving along the adoption curve.”
WHAT THIS MEANS FOR FINTECHS: Here are some tips on how fintech apps can nail consumer onboarding.
3. We’re at the tip of the iceberg of blockchain possibilities
In May 2010, a programmer in Florida paid 10,000 Bitcoins for two Papa John’s pizzas (May 22 is now celebrated as Bitcoin Pizza Day in crypto circles). Today, those two pizzas are worth $500 million.
As an asset class (investing and spending), cryptocurrency — especially Bitcoin — has already broken into the mainstream. While general education about cryptocurrency should and will improve among the masses, the underlying blockchain technology that fuels cryptocurrency is where so much of the undiscovered opportunity still lies.
There’s been a recent explosion of projects building on that core blockchain technology. Non-fungible tokens, or NFTs, have become a trendy recent blockchain development to disrupt the world of art and digital content. It’s possible that we aren’t even scratching the surface of what kinds of additional products and exchanges could be born from the blockchain. In this webinar alone, our panelists touched on smart contracts, the disruption of venture capital as more trust is placed in the liquidity of cryptocurrency, real estate reform, and wealth preservation.
Levin says, “These two worlds (traditional finance and crypto) are colliding as Ethereum opens up possibilities to get into different markets people are thinking about like gaming and art. Bitcoin will continue to grow in acceptance as a store of value as long as it survives.”
WHAT THIS MEANS FOR FINTECHS: Make sure that you’re continually introducing your users to new use cases as they emerge, especially the ones that you offer or are already involved in.
The Bottom Line
There is tremendous energy and cohesiveness around the Bitcoin narrative and cryptocurrency, in general, but we’re still in the early innings of the game.
As more and more crypto-enabled companies are built, we’re going to see the institutional funding capabilities of crypto grow. Common fintech industry best practices like reliable security, seamless onboarding, and consumer education apply to the world of cryptocurrency, too. But due to the moment cryptocurrency is having right now plus evolving regulation, it’s even more important for fintechs to focus on these key pillars of customer success.
During the webinar, we asked our panelists to rate on a scale from 1–10 how close we were to universal acceptance of cryptocurrency. Despite the awareness cryptocurrency has today, all three were in agreement that the number was still very low. Dudas put it best, “If you believe crypto represents the biggest financial shift of our time — and I do — we’re only at a 2.” It’s become clear that cryptocurrency is no longer just a speculation instrument, but core to the new financial ecosystem we’re all a part of and its significance will only grow from here.
