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How Cryptocurrency is changing Fintech

Coin Companion | Victor Huang | March 15, 2021

Cryptocurrencies impact on fintech - How Cryptocurrency is changing Fintech

How Cryptocurrency is changing Fintech

Cryptocurrencies have been on a rising uptrend lately. All around, we’re seeing more mainstream talk and adoption of this new blockchain technology and industry.

Regulations are becoming a little stricter as they find their ways around how to apply existing fintech laws onto such bizarre cryptocurrencies as they sit in the middle of a commodity and a security.

Transaction Cost and Time

The fintech world and the traditional banking systems are like the days where books and information were expensive and slow to move. Then came along the internet and transformed how to interact with information.

So with the advantages of blockchain technology, Bitcoin and other cryptocurrencies are revolutionizing how fast and how inexpensive we can move money around. Bitcoin settles transactions within a few hours whereas banks may take days.

Blockchain also doesn’t charge fees on a percent basis but charges a flat fee for transactions. Business will not have to suffer enormous costs simply because they have a high volume rate or they move huge sums of money around.

If you want to buy bitcoin in Canada, you also would not need to wait for banks to be open, or pay large fees to send to someone in another country. Coin Companion has reviewed some of the best exchanges to buy bitcoin in Canada.

 

Decentralized Applications

Cryptocurrencies are transforming the way we think about trust. What does it mean to trust a 3rd party company? How do we know we can trust them? Why do we trust them?

The rise of these dApps have proved to become extremely popular with the likes of Uniswap, Aave, Compound Finance to name a few. Uniswap is a decentralized exchange where anyone can exchange tokens with anyone. The volume for Uniswap is sometimes larger than some of the biggest exchanges like Coinbase. Early this year, Uniswap hit $100 billion in trading volume - this shows the demand for these decentralized services.

 

Regulation

Due to the decentralized nature of cryptocurrencies, the US financial regulation bodies, such as the SEC has declared Bitcoin and Ethereum as a commodity. This means that no one entity owns these virtual currencies and so it won’t be subject to any security laws.

On the other hand, Ripple’s cryptocurrency XRP has been sued by the SEC for securities fraud. Now this raises many questions of the nature of crypto and what a security even is.

For those that don’t know, the definition of a security is based on a 1933 Howey Test. The three main components of the test asks if the object is:

  1. An investment of money
  2. The money investment is a common enterprise
  3. With an expectation of profits predominantly from the efforts of others

 

Now on the surface it may look like cryptocurrencies apply to all three of these, but on a deeper look, crypto’s can be a little hard to identify whether or not it’s a security.

Unlike stocks and shares, the success of a particular company or project does not necessarily mean an increase of value on their cryptocurrency. A good example to look at is the Brave browser.

See:  Cryptocurrencies Aren’t An Alternative. They’re Here to Stay.

Arguably, the Brave browser is the most popular and successful cryptocurrency product used in the real world, but their native token BAT, has not seen a price increase to match the popularity of the product.

Then there is also the decentralization and money factor of crypto. At what point does it become a commodity like gold and silver? That’s a line which has not been fully understood by the SEC yet.

What You Need To Know

The landscape for fintech is rapidly shifting and cryptocurrencies are changing in an entirely new way.

We would highly recommend paying crucial attention to this tech in the upcoming years as more companies and businesses adopt it.

 


NCFA Jan 2018 resize - How Cryptocurrency is changing Fintech The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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