Senator Cynthia Lummis (R-WY) has given a specific date for when her long-awaited crypto regulator bill will be unveiled. The legislation will help to sort cryptocurrencies under appropriate regulatory labels and federal jurisdictions. According to a tweet from the senator on Friday, the final version of her bill will be released on Tuesday, June 7th. Lummis has spent months working on the bill alongside Senator Kirsten Gillibrand (D-NY), announcing it as early December 2021. The bill will reportedly provide sweeping…
The global financial sector is drastically changing after the advent of cryptocurrencies in the market. A plethora of crypto ensures that everyone is spoilt for choice in investments, payments, and exchange depending on their needs. The success of digital currencies and blockchain technology is giving a wake-up call to different industries.
Therefore, it is an era where the adoption of the two entities is nigh. Considering the alterations that continue to flood blockchains, their applications are endless. For this reason, more financial institutions are finding their way into the decentralized space to leverage the technology. The same goes for fintech companies, hoping to shift the odds to their favor.
However, it is vital to understand the extent of what cryptocurrencies can offer the fintech industry. Let’s have a closer look.
Understanding the Fintech Industry
Financial Technology (Fintech) refers to the technologies used to provide financial services. Financial institutions initially applied it in their back-office operations. However, fintech is more pronouncedly representing the current techniques revolutionizing traditional financial services. It incorporates mobile money transfer, mobile payments, loans, fundraising, and asset management.
Fintech startups have tremendously been disrupting traditional operations in the financial service industry. For this course, the integration of cryptocurrency in fintech is proving to be a cutting edge move for them. Traditionally, businesses and individuals would need to access a bank for a loan. If the same business wanted to allow credit cards among its payment options, it would have to open an account with a credit provider.
Fintech changed the way businesses startup, make and accept payments even for international transfers. Business startups benefit from unsecured loans, while platforms like Transferwise, PayPal, and Square made it possible for international transactions. However, cryptocurrency and its supporting blockchain technology create a whole new experience.
Cryptocurrency Revolutionizing the Fintech Industry
Fintech companies are utilizing blockchain technology to come up with their first cryptocurrency. The idea behind such moves is to allow customers fast access and trading with crypto and traditional money.
The adoption of cryptocurrency would speed up the bank to bank transactions, which traditionally take up to 72 hours. Cryptocurrencies allow safe and instant cross-border transactions, and this is just a fraction of the financial capabilities that the financial sector can realize.
International Cash Transfers
Startups in the fintech industry provide international cash transfer platforms, but cryptocurrency creates more significant impacts on fintech transactions. Most of the transfer options deal in fiat currency and still rely on financial institutions.
Cryptocurrency eliminates reliance on banks by allowing users direct access to their digital money through digital wallets. International transfers are peer to peer, and transaction charges are lower compared to other methods. Furthermore, transactions are secure in the public ledger and accessible to all users connected to the computer networks.
E-commerce payment is among the major financial technology innovations applied before cryptocurrency. Cryptocurrency can replace or improve such payments by making transactions faster. Some online businesses accept cryptocurrency as a payment option, and the method’s benefits will likely entice customers. Digital wallets remain secure, unlike credit cards, and the transaction costs are low. Besides, users can make payments without having to carry credit cards around. Only a smartphone will be necessary.
Among the aims of financial technology is to provide better and more efficient means of accessing financial services. Blockchain technology and cryptocurrency are providing more capital generating avenues. Fintech startups can raise money for their projects through cryptocurrency-based Initial Coin Offerings.
Such options bring to an end the tedious paperwork associated with raising capital in the traditional financial system. Blockchain technology provides a secure platform where companies can offer ICOs. Investors stake their digital monies while entrusting the security features of the technology.
Mobile Banking and Credit Services
Traditional mobile banking and mobile loans are usually tied with banks and their rules. All of them utilize the fiat currency and are subject to the shortcomings of the centralized currency. Cryptocurrency, on the other hand, is decentralized and not tied to any central authority. Mobile banking platforms are likely to be more efficient with digital money as compared to fiat currency. Fintech startups utilizing digital currency promises more interest on deposits and less interest on loans.
Loan services are more accessible and fast as there are no tedious verification procedures. Physical assets are converted to tokens and used as collateral, and owners can continue to use their assets. Owners can use the tokens as a whole or in portions representing a part of their assets and access loans equivalent to that portion.
Financial Service Accessibility
The traditional financial system was unable to reach all populations, thus limiting the application of financial technologies. The incorporation of cryptocurrency in the financial industry opens up banking and other financial services to millions of unbanked people. Anyone can own and operate digital wallets, and there are no restrictions for joining. Fintech startups are likely to come up with digital coins and cryptocurrency platforms to serve this new market.
Such platforms are more likely to have a higher adoption rate, and cryptocurrency could become the future of financial systems. The unbanked population is currently financially disadvantaged and remains exposed to potentially exploitative lending services. An easily accessible and cheap financial system for their financial needs will come in handy for them.
Cryptocurrency’s potential ability to eliminate financial barriers such as regulation and the ability to penetrate new markets are quite attractive to investors. Cryptocurrency and its blockchain-based technology promise high hopes in the future of the fintech industry.
Some top fintech companies are launching their first coin, while other financial service firms set up cryptocurrency banks. Such banks mean that customers can access digital and fiat currencies and trade with them using their bank accounts. Seba Crypto AG investors raised more than $103 million intending to establish such banks. The adoption of cryptocurrency indicates that firms are beginning to realize the potential that digital currency has, and this is just the beginning.