As we enter 2019 in the midst of what some are calling the crypto winter, the chatter in blockchain circles is (rightly) all about BUIDL. Teams that have been hard at work while the market crashes are announcing the new features, capabilities, and technologies they feel will power the next wave of crypto adoption.
In the security token industry, we are well aware of the hurdles that token issuers, investors, and other market participants are facing. We have to continue cracking down the barriers to engage and create trust layers that satisfy investors, particularly institutional ones. Aside from the numerous and complex challenges around regulatory compliance, there are still usability limitations with crypto that make it difficult to deliver the mass adoption we’re all pining for. I always pose the question “Could my Dad do this?” and inevitably, the answer has been a resounding “no”.
“It’s become obvious that familiarity and trust are key to investors in order to create adoption for digital securities. Fiat gateways create that reliable and convenient entry point.” — Swarm CEO Philipp Pieper
One of the key questions I’m often asked by the yet-unconverted-to-crypto is “when will I be able to invest real money?” This is evidence that while there is no shortage of appetite from both retail and institutional investors, the hops required to acquire Bitcoin or Ethereum along the way are seen as sluggish and risky. From here, it is a small leap to conclude that investors are out there and want access to exclusive high-yield financial opportunities. However, they are not fully comfortable departing from fiat just yet, and many don’t want to bear the crypto volatility that erodes ones capital while waiting for opportunities to get funded. It is perfectly okay to then ask whether major cryptos like Bitcoin and Ethereum are even necessary when investing in real assets through security tokens. These questions are valid, and the issues they represent deserve real solutions.
Looking back on 2018, stablecoins have been touted by well-respected crypto voices as the escape from volatility that might be the catalyst for mass adoption. From Tether to DAI to Paxos, we’re now seeing dozens of these in the market. But let’s be real, is my Dad going to buy DAI on a decentralized exchange to invest in art on Swarm? Not likely. He’s just not there. But offer him 10% annual returns from investing with Australian dollars? That’s more his speed. The concept of Stablecoins is still well within the realm of “crypto heads only”, rather than the obvious solution for reluctant investors some may hope them to be. In fact, in most cases you still need crypto to obtain them. So where does this leave us?
Last week, Swarm announced its integration with global currency specialist Mercury-FX, enabling investors to commit funds towards security token opportunities on Swarm’s marketplace in over 30 global fiat currencies. A trusted leader in the space, Mercury FX recently became one of the first payment providers with access to Ripple’s new xRapid cross-border payment solution. Of working with Swarm, founder Alistair Constance said “Swarm’s open technology is a perfect compliment to Mercury FX, and they share our mission of constantly finding better ways to safely connect people and their money.” The functionality provided by this partnership is a giant leap towards creating the infrastructure the market needs.
Is the invitation to invest in digitized securities with fiat a threat to crypto? Perhaps, and that’s not necessarily a bad thing. Every nascent industry needs to prove its use case. At Swarm, we are confident that the benefits of broadening access via fiat support outweigh any negatives. If anything, greater inclusion is likely a step toward mass adoption in the broader market. A fiat gateway connects traditional retail investors with new asset classes and allows for institutional onboarding to tokenized investment opportunities. As investors receive their security token allocations, and use tokens for voting, and other functions made possible by cryptocurrency, the benefits become clear.
At Swarm, as a nonprofit with the goal of improving access to financial opportunities for all, we do what we can to piece the greater puzzle together. Fiat support is a key piece in this puzzle.