When talking about blockchain, one is prone to hear the buzzword ‘fintech’ as those work quite well in combination. Idealogic has been working with blockchain technology for quite some time, and we are well aware of what is happening in the industry. Today, we want to share with you our vision on what is going on in the market of financial technology and blockchain. We’ll talk about what fintech and blockchain are, and how Economy 2.0 is (not) working. Let’s get right into it!
Financial technology (Fintech) stands for new technologies that aim at improving and automating the delivery and use of financial services. Fintech is deemed to help both corporates and individuals to better manage their financial processes and operations by utilizing specialized algorithms and software. At its inception, however, fintech was applied to the technology employed solely at financial institutions. Since then, there has been a shift from specialized corporations to more consumer orientation. Today, fintech includes various industries and sectors such as investment management, retail banking, education, and, of course, the development of such cryptocurrencies as bitcoin.
As for Blockchain, it is a decentralized chain of transactional records stored in the form of blocks. The information in the system is secure and unalterable. Although blockchain is indeed not limited to the financial industry, from the very beginning, it was meant to bring about transparency, high transaction speed, and the absence of fees. Moreover, it was believed to lay the foundation for economy 2.0 – technological, intuitive, and efficient.
Fintech may have captured a lot of headlines as well as attention from individuals, businesses, and investors, but the big money still lies in the traditional banking industry. According to Coinmarketcap, in August of 2019, the total fiat market accounted for $81 trillion. All the cryptocurrencies, on the other hand, amounted to about $300 billion – only 0.37% of the fiat market capitalization.
Today, the worlds of fiat and crypto are separated. Although there are countries where cryptocurrencies have gained quite a lot of popularity (e.g. Morocco, Nigeria, Namibia, South Africa), they are in the minority. Most countries have either little interest or a lack of access to crypto. Several evangelical companies try to force its adoption – they create points of sale, develop efficient crypto exchanges, and try hard to awaken or boost the interest from the public, but the prospects are not clear yet. It is legislation that is the main player impeding the progress in effective adoption. Take the case of TON, for example. Telegram Open Network (TON) was to become a blockchain platform offering messaging, Gram cryptocurrency, and other services protected by a built-in proxy and anonymizer. However, the US Securities and Exchange Commission banned the issuing of Gram tokens in 2019 – the reason being that they should be registered as a security. The platform attracted $1.7 billion in investments and was meant to launch in April. It didn’t.
The case of TON is very illustrative. It proves that fintech may be quite successful locally, where there are fewer restrictions and requirements. However, something really global is extremely difficult to implement. One country’s legislation can easily ban the issuing of tokens, and the whole process comes to a halt. Today, this fact severely limits the attractiveness of both investment projects in the industry and tokenization in general.
It definitely impacts our activity as well – at the moment, most of our projects in the Fintech area are related to the separate service for fiat and crypto economies. Soon, we’re going to presents a couple of case studies, such as BitHolder and Swissy which help their users to easily operate their crypto funds, take loans, earn on deposits, or purchase cryptocurrencies. At the same time, we face a significant lack of crypto-friendly processing solutions that would allow users to automatically convert crypto to fiat with a low commission.
We believe that the development of superior innovative technologies, the emergence of Ether 2.0, and other breakthroughs in the fintech and blockchain sectors are of a derivative character. Eventually, they depend on the regulation of particular countries. In our opinion, there are two major scenarios. On one hand, we may see a trend of governments’ shifting from their rigid stances to a more democratized approach to blockchain and fintech. If so, businesses and individuals will have the opportunity to merge the two worlds and integrate them seamlessly. On the other hand, governments (especially those of the wealthiest and thus the most powerful countries) may stick to their current agenda and hamper the integration.
Summing up, fintech and blockchain would make a prominent duo, especially if there are few limitations and legislative restrictions. Developers may have brilliant ideas and ways of their implementation, but in the end, it is governments who decide what can and cannot be used on the national level. As developers, we are looking forward to the realization of the first scenario mentioned above and are enthusiastic about the future in general. As realists, however, we understand that there may be quite a few bumps on the road but we are ready to bear them.