FINTECH FOCUS: DIGITAL CURRENCY
Odd one... in? For many, digital currency is still an alien concept. We’re told it has the potential to revolutionise how we pay, borrow and spend. However, few of us understand how it works, the forces driving this change, and the implications this might have for our daily lives.
Yet, despite this uncertainty and lack of knowledge, digital currencies have seen a meteoric rise in usage and media attention, further accelerated by the pandemic. The key questions everyone is asking themselves are ‘when will the mass adoption of digital currency happen?’ and ‘when will digital currencies be omnipresent, with all generations making use of them to pay for groceries in supermarkets, purchase memberships, receiving salaries and pay their taxes?‘.
2021: A BREAKTHROUGH YEAR While the COVID-19 pandemic brought the entire world to a halt, the digital currency movement sped up significantly throughout 2020 and 2021. This year, we’ve seen the price of Bitcoin reach an all-time high and general digital currency popularity enjoy a significant surge. In parallel, regulatory scrutiny has increased across the globe, with governments taking this new form of money very seriously and investigating its uses for official purposes. While digital assets have received attention from institutional investors for a while, the past 18 months have seen a flood of high-profile organisations integrate them into their business models and investment portfolios. Just this summer, Paypal offered UK customers the option to buy, hold and sell digital currencies, while,
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ThePaytechMagazine | Issue 10
René Pomassl, CEO of digital currency payment enabler Salamantex, charts the exponential curve in altfi fandom
in the autumn, electronic trading platform Robinhood announced it would begin offering crypto wallets on its app. Neobank Revolut also started to let its clients purchase digital currencies directly inside the banking app. It’s not just investment and payment platforms either; digital currency has also arrived in the property sector, with United Wholesale Mortgage declaring that US homebuyers will have the option of paying for their mortgage in Bitcoin. And, in El Salvador, an entire nation has adopted Bitcoin as legal tender. This is only the start. The strengthening of digital currency’s foothold in such a large variety of industries is accelerating its journey to mainstream adoption, with more businesses likely to follow suit in the near future. However, its evolution will not remain limited to the financial and business world – it will indeed impact our everyday lives.
COVID BLIP OR AN EVOLUTION? It’s clear that the digital currency movement has picked up pace, but why? There’s no doubt that COVID has played an important role in the acceleration. While the use of cash for payments has been falling for over a decade, the trend appears to have been hastened by the pandemic. In the UK, the LINK ATM network says cash withdrawals are now nearly £100million less per day than in 2019.
Digital currencies have been one of the natural beneficiaries of this transition. The number of users worldwide doubled from 100 million to 200 million in the first four months of 2021 alone. The COVID crisis, however, should not be held solely responsible for the boom. Digital transformation of their operational infrastructures and business processes has been a key target for many industries for several years now. Consequently, money, as we have come to know it, has also been reimagined to fit this new way of doing business. COVID has simply forced regulators and entire countries to act faster to enable a more digitised world, including payments. So, what next? Digital currency is no longer an innovations of the future, but rather an increasingly viable payment option being used by a growing number of industries as well as end-users. The question we really need to consider is not whether mainstream adoption will become reality, because it will. Instead, we need to look at how we want digital currencies to fit into the broader financial ecosystem. We don’t expect them to replace conventional payment methods, but to become one additional option to choose from. End-users’ appetite is already detectable across borders and big institutions have long joined the early adopters. Banks and regulators are on track to facilitate this so-far linear evolution. The benefits digital currencies offer, like faster and more efficient processing, will be key components in future-proofing the global economy. What this future will precisely look like is impossible to say, but all the signs point to digital currency playing a an increasingly influential role in it. www.fintechf.com
