Lots of us are rightly focused on what crypto is doing day by day or perhaps in the next week or two. But what does the future of crypto transactions look like? Predicting the future of crypto is not an exact science, but it’s possible to use some of the trends we are seeing in the industry now and look at how they may shape the next few years. This is something that we think about constantly at Fideum: how can we play a role in the future of crypto transactions? This blog aims to make some of those predictions and touches on how Fideum is working with these ideas in mind today.
What could the future of crypto transactions look like?
Crypto transactions offer a huge array of possibilities to retail and institutional finance today. Here are some of the ways we see that they could develop or change in the years to come.
Increased adoption
We will definitely see an increased adoption of crypto, and therefore a drastic increase in crypto transactions worldwide. Daily transactions have come a long way since the first Bitcoin transaction took place in 2009. Between January and March of this year, there were an average of 378,000 daily Bitcoin transactions.
At Fideum we created the HODL card, a means to buy pretty much anything you want - coffee, gas, a birthday gift, a gym membership - with a card loaded with your crypto. These kinds of integrated digital wallets, which bring crypto into existing digital financial spaces, will only become more and more popular. Crypto becoming an integral part of day-to-day spending will only increase adoption as customers realize that crypto is not something nebulous and remote from their regular daily transactions.
Integration with institutions
Institutional adoption will take time, but for future crypto transactions to continue growing, there will need to be enhanced integration with institutional finance. There are several reasons for this, including aiding the kind of mainstream acceptance we detailed above, the ability to develop new - and improve existing - infrastructure, the chance for better innovation, and more comprehensive regulation.
Blockchain is already being increasingly integrated into the existing financial system. Incumbent institutions are exploring more and more aspects of blockchain, asset management and digital currencies, as skepticism reduces.
For this to happen in a way that benefits the future of crypto transactions, crypto companies need to be open to working with institutions. Institutional investors need to be able to see themselves in crypto to understand the full benefits, and to expand their horizons into digital assets in a way that benefits them and their consumers.
OTC trading
Over-the-counter (OTC) crypto trading is the exchange of crypto between two parties outside of traditional cryptocurrency exchanges. These trades are facilitated by brokers and specialized trading desks, offering privacy, flexibility, and a reduced market impact. OTC crypto trading is typically used for high-value transactions and is popular among high-net-worth individuals, crypto miners, and institutional investors. It’s an exciting aspect of crypto transactions with plenty of potential for future expansion as traditional and digital domains become more fully integrated.
Again, it is something we have been focusing on at Fideum. Fideum offers OTC trading to allow institutions to meet their demands in the crypto space. Whether that’s through global reach, our expertise, or focusing on building a solution that goes beyond typical trading.
More - or less - privacy
Crypto transactions are expected to become increasingly private - yet also more transparent. Regulations such as the Markets in Crypto Assets (MiCA) regulation in the European Union or FIT21 in the US are introducing more rules and legal frameworks in the crypto industry. Fideum has worked hard to make sure we are fully regulated, and has done a lot of work to ensure that we are ready for MiCA's implementation this year.
As we know first hand, implementing these regulations can be challenging. This is largely due to the decentralized nature of crypto, and the way in which regulations can change rapidly as technology develops, and incidents happen around the world. Regulations are also open t scrutiny from customers who value the private nature of cryptocurrency. While regulation will certainly help to increase adoption through the better reputation of crypto, it will also inspire new ways to remain private. The development of privacy-focused cryptocurrencies - also known as privacy coins - will grow as regulations become stricter. Privacy-enhancing technologies are a notable trend, creating methods such as zero-knowledge proof and ring signatures to integrate into existing blockchain platforms and provide more privacy in transactions.
CBDCs
Central banks around the world are showing interest in Central Bank Digital Currencies (CBDCs), which are government-issued digital currencies on the blockchain. These currencies offer benefits like swift, secure transactions, and increased programmability. But they aren’t without controversy. Many believe that privacy and the sacrifice of personal data to the government will outweigh the positives if CBDCs become the norm. Many others consider that this shows governments’ willingness to move into digital assets, and if done right can offer increasingly beneficial options in the financial sector.
Challenges
The future of crypto transactions will also face challenges that could hinder growth and development. Regulatory uncertainty will make the industry cautious about investing in new opportunities or innovation. Regulation and governance are particularly challenging when applied to crypto in different ways in different regions. These differences complicate transactions across borders. The lack of clear and consistent regulations can create a hostile environment for businesses and users.
Wide-scale adoption and integration with institutions are a huge positive for the future of crypto transactions, but they could also cause scalability issues. Blockchain networks will need to be developed to handle the pressure of a broader audience and at a global scale. It will also require an increase in user education and a more seamless blend of technologies that stands out less to the average consumer. As Fideum CEO Anastasija Plotnikova recently said in a recent podcast interview: “We can call it mass adoption when we use things without thinking ‘this is something on the blockchain.’”
Crypto transactions, like other financial solutions, remain at the mercy of volatility and fluctuations due to several factors. Whether that’s politics, new technologies, regulation or sentiment, there are still strong changes in the tide that can have a damaging effect on crypto transactions. This makes full adoption and integration a more difficult proposition.
Ready for the future
The future of crypto transactions will depend on the same dynamic and rapidly evolving landscape in which it exists today, but marked by even more innovation, and even more uncertainty. But while there are significant challenges to overcome, the potential benefits of crypto transactions - greater financial inclusion, wider options, seamless integration with institutions, and new solutions - are simply too good to ignore. As both technology and users continue to adapt to these changes, crypto transactions look set to become of increasing importance to the global economy and our existing financial system.
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