The cryptocurrency industry is no longer just a niche market; it’s a burgeoning global financial force, poised to reach a staggering USD 11.7 billion by 2030. Fuelled by rapid technological advancements, evolving regulatory landscapes, and increased mainstream adoption, the sector is facing both unprecedented challenges and exciting opportunities. As blockchain and digital currencies continue to disrupt traditional finance, understanding the key trends driving these changes is essential for anyone navigating the crypto ecosystem.
#1 AI’s Game-Changing Impact on Crypto Exchanges
AI is revolutionising the way crypto exchanges operate – from enhanced efficiency and security to a more personalised user experience.
One of the most significant contributions of AI is the use of automated trading bots. These bots can analyse vast amounts of market data, predict price movements, and execute trades with precision, often outperforming human traders. By operating 24/7 and eliminating emotional biases, AI-powered bots offer a significant advantage in the fast-paced world of cryptocurrency trading.
AI also plays a crucial role in improving security on crypto exchanges. By using machine learning algorithms to monitor and analyse transaction patterns, AI can identify and mitigate the risks of hacks and fraud, which have plagued the cryptocurrency space for years. For example, in 2023 alone, crypto scams led to losses of over USD 5.6 billion in the US.
AI personalises the user experience by offering tailored recommendations based on individual trading behaviour. Additionally, AI performs market sentiment analysis by processing unstructured data from social media, news outlets, and other online platforms, providing valuable insights into market trends. AI also plays a crucial role in improving security on crypto exchanges.
#2 Global Cryptocurrency Regulations: A Maturing Landscape
Cryptocurrency regulations are evolving rapidly around the world as governments strive to manage risks and protect consumers. The Markets in Crypto-Assets (MiCA) regulation in the EU is a significant milestone, requiring licensing for all crypto firms operating within the bloc and mandating stringent consumer protection measures, including capital requirements for stablecoins.
In the US, efforts like the Financial Innovation and Technology (FIT) for the 21st Century Act and the Blockchain Regulatory Certainty Act are expanding oversight of the industry and clarifying the roles of different regulatory bodies. Similar regulatory movements are underway across Asia. Japan has recognised crypto as legal property, and South Korea passed the Virtual Asset Users Protection Act to increase transparency. However, countries like China and India maintain restrictive approaches, with bans on trading and mining.
Brazil’s 2023 Cryptoassets Act demonstrates the global trend towards more robust regulation, aiming to prevent fraud in the crypto sector.
#3 Mergers and Acquisitions: A Strategic Play in the Crypto Space
As traditional financial institutions race to embrace the digital asset revolution, mergers and acquisitions are becoming a strategic tool to gain a foothold in the cryptocurrency market. By acquiring crypto companies with real-world applications and robust infrastructure, these institutions aim to expand their digital asset capabilities and stay ahead of the curve.
Examples like Ripple’s acquisition of Metaco and Coinbase’s purchase of One River Digital highlight the growing interest in integrating traditional financial services with blockchain technology. These M&A deals not only enhance service offerings but also facilitate entry into new markets and the development of innovative solutions.
Looking ahead, we can expect to see even larger financial institutions playing a more active role in crypto mergers and acquisitions. As the demand for scalable, compliant blockchain solutions continues to grow, strategic partnerships and acquisitions will become increasingly important in paving the way for broader adoption of digital assets.
#4 CBDCs and Stablecoins: A New Era in Digital Finance
Central Bank Digital Currencies (CBDCs) are gaining significant traction, with 86% of central banks actively exploring their potential. Major economies like the UK, EU, and US are in various stages of CBDC research and development, carefully considering privacy concerns, financial stability, and the impact on commercial banks. Smaller nations like the Bahamas, Nigeria, and Jamaica have taken the lead, launching CBDCs to serve as digital alternatives to traditional fiat currencies.
In the private sector, stablecoins have experienced substantial adoption. Major financial institutions and payment providers are integrating stablecoins like USDC and Tether (USDT) into their services, processing billions in daily transaction volume. This growth has prompted regulators worldwide to develop comprehensive frameworks, such as the EU’s MiCA regulation and similar efforts in the UK and US. These regulatory initiatives aim to provide clear guidelines while fostering innovation.
As traditional financial institutions explore stablecoin integration for both retail and wholesale applications, the future of digital finance looks increasingly promising.
#5 The Focus on User Experience and Security
As the crypto landscape continues to evolve, the focus on user experience and security has never been more critical. Cyberattacks are becoming increasingly sophisticated, targeting crypto exchanges and DeFi platforms alike. Historically, the industry has been developer-centric, with little attention paid to creating intuitive platforms for everyday users. However, as more consumers embrace blockchain-based financial services, there is a growing demand for seamless, user-friendly interfaces.
Security is another major concern. High-profile hacks and fraud have tarnished the reputation of the crypto industry, leading to skepticism among users and regulators. DeFi platforms, in particular, have been frequent targets due to vulnerabilities in smart contracts. To foster widespread trust and adoption, the industry must prioritise integrating security features by design, such as blockchain analytics for detecting fraudulent activities and advanced risk management tools.
Emerging technologies like social recovery wallets, which help users regain access to lost funds, and improvements in blockchain scalability and efficiency, will be instrumental in attracting more mainstream users.
Crypto’s Future: A Balancing Act
The future of the crypto industry hinges on its ability to strike a delicate balance between innovation, regulation, and security. As digital assets become more deeply integrated into mainstream finance, we can expect to see a surge in tokenised real-world assets, stablecoins, and central bank digital currencies.
Collaboration between regulators, financial institutions, and tech innovators will be essential in shaping a secure and inclusive ecosystem. Ultimately, the success of crypto will depend on its ability to build trust while delivering the efficiency and transparency that define a rapidly evolving digital economy.
Zurich will be the centre of attention for the Financial and Regulatory industries from June 26th to 28th as it hosts the second edition of the Point Zero Forum. Organised by Elevandi and the Swiss State Secretariat for International Finance, this event serves as a platform to encourage dialogue on policy and technology in Financial Services, with a particular emphasis on adopting transformative technologies and establishing the necessary governance and risk frameworks.
As a knowledge partner, Ecosystm is deeply involved in the Point Zero Forum. Throughout the event, we will actively engage in discussions and closely monitor three key areas: ESG, digital assets, and Responsible AI.
Read on to find out what our leaders — Amit Gupta (CEO, Ecosystm Group), Ullrich Loeffler (CEO and Co-Founder, Ecosystm), and Anubhav Nayyar (Chief Growth Advisor, Ecosystm) — say about why this will be core to building a sustainable and innovative future.
Download ‘Building Synergy Between Policy & Technology’ as a PDF
Innovation and collaboration are the cornerstones of FinTech success stories. Successful FinTechs have identified market gaps and designed innovative solutions to address these gaps. They have also built an ecosystem of partners – such as other FinTechs, large corporates and financial services organisations – to deliver better customer experiences, create process efficiencies and make compliance easier.
As FinTechs have become mainstream over the years the innovations and the collaborations continue to make technology and business headlines.
Here are some recent trends:
- The Growth of Cross-border Finance. Globalisation and the rise of eCommerce have created a truly global marketplace – and financial agencies such as the MAS and those in the EU are responding to the need.
- Transparency through Smart Contracts. As businesses and platforms scale applications and capabilities through global partnerships, there is a need for trusted, transparent transactions. Symbiont‘s partnership with Swift and BNB Chain‘s tie-up with Google Cloud are some recent examples.
- Evolution of Digital Payments. Digital payments have come a long way from the early days of online banking services and is now set to move beyond digital wallets such as the Open Finance Association and EU initiatives to interlink domestic CBDCs.
- Banks Continue to Innovate. They are responding to market demands and focus on providing their customers with easy, secure, and enhanced experiences. NAB is working on digital identity to reduce fraud, while Standard Chartered Bank is collaborating with Bukalapak to introduce new digital services.
- The Emergence of Embedded Finance. In the future, we will see more instances of embedded financial services within consumer products and services that allows seamless financial transactions throughout customer journeys. LG Electronics‘ new NFT offering is a clear instance.
Read below to find out more.
Download The Future of Finance: FinTech Innovations & Collaborations as a PDF
The ongoing global crisis is expected to drive more investments in FinTech. Blockchain adoption, in particular is expected to lead to a more open and interconnected economy that is borderless, transparent and does not need counter-party trust to operate. One particular area where Blockchain has been piloted is in smart contracts. Financial contracts involve legal work, document handling, sighting, signing, and sending them to the right people. All of this involves both time and people – and proves to be an expensive option eventually. Blockchain can speed this process up in a secure (with no failure points), interoperable and risk-free environment.
While smart contracts are expected to increase efficiency, there are questions being raised with respect to interpretation and technical capacity. The Law Commission in the UK is conducting a detailed study to analyse how current law applies to smart contracts and to highlight any uncertainties or gaps in relation to enforceability, interpretation and so on. The World Bank is looking at the role smart contracts could play in improving financial services in poorer nations – especially in insurance and short-term unsecured loans. Initiatives such as these are a positive step towards adoption.
However, smart contracts are not the only area that financial institutions and governments have in mind when they pilot and adopt Blockchain – and there are several recent instances.
Digital Currency
Many central banks have started identifying potential use cases for digital representation of fiat money that offers them unique advantages at various levels. According to Bank of International Settlements (BIS), 80% of the world’s central banks had already started to conceptualise and research the potential for central bank digital currencies (CBDCs), 40% are working on proofs-of-concept (POCs) and 10% are deploying pilot projects. The People’s Bank of China (PBOC) announced last month that it has processed more than three million digital yuan transactions since it began piloting its CBDC late last year. Transactions include bill payments, bar code scans, tap and go payments, and payments for transport and government services.
Singapore’s Project Ubin has successfully completed its fifth and final stage and is a step closer to greater adoption and live deployments of blockchain technology. The commercial applications of the payments network prototype include cross-border payments in multiple currencies, foreign currency exchange, settlement of foreign currency-denominated securities, as well as integration with other blockchain-based platforms to enable end-to-end digitalisation across many industries and use cases.
Crypto Exchange Ecosystems
A crypto exchange or digital currency exchange (DCE) makes it easier for buyers and sellers to securely store, buy, sell, or exchange crypto currencies. Various players across the financial industry have developed tools connecting the transactions, flow of funds, and financial instruments through crypto exchanges – including banks, digital payments and other FinTech providers.
In an effort to expand its retail presence, FTX acquired crypto app Blockfolio for USD 150 million in August 2020. Recently, FTX announced the launch of trade in the stocks of some of the largest global companies – Tesla, Apple, Amazon – by tokens against bitcoins, stablecoin and more.
In order to empower the emerging initiatives in the decentralised finance (DeFi) space, the world’s largest crypto exchange platform Binance announced the creation of a seed fund in September. Their USD 100 million accelerator fund added five new Blockchain projects – Bounce, DeFiStation, Gitcoin, JustLiquity and PARSIQ that will receive financial support from the fund.
PayPal has announced crypto buying and selling services through Paypal accounts. Paypal’s crypto service in partnership with Paxos is being rolled out in phases across the US. Outlining their plans for 2021, Paypal announced new crypto payments features including enhanced direct deposit, check cash, budgeting tools, bill pay, crypto support, subscription management, buy now/pay later functionalities and more with the integration of the capabilities offered by Honey – an internet browser extension and mobile app which PayPal bought for USD 4 billion in 2019.
It is expected that banks will join in as well – it has been reported that DBS Bank in Singapore is planning to launch a digital asset exchange platform to enable institutional and retail customers to trade cryptocurrencies.
Blockchain Enhancing Banking Features and Services
We are also witnessing several pilots and initiatives in banking industry functionalities such as settlements, identity management, security, transparency, and data management.
In theory, the bank reconciliation is simple, however, in practical aspects things may not work out so easily. The funding, lending, transfer, and transactions reconciliations is a complicated and time-consuming effort. in March 2020 the Spunta Banca DLT system promoted by the Italian Banking Association (ABI) and coordinated by ABI Lab was implemented across the Italian banking sector. Powered by R3’s Corda Enterprise blockchain, the solution streamlines and automates the reconciliation of transactions, provides real-time reconciliation process, handles technical elements with automated feedback and results in more transparent processes. Spunta has attracted broad interest from the Italian banking sector and since October, around 100 banks have been operating on Spunta to manage the interbank process and automate reconciliation of transactions.
Recently, in Spain, ten leading banks including Banco Santander, Bankia, BME, CaixaBank, Inetum, Liberbank, Línea Directa Aseguradora, Mapfre, Naturgy and Repsol, and the Alastria consortium have come together to build a self-managed digital identity (ID) solution dubbed as Dalion built on Blockchain technology. The project based on Alastria digital identity model (Alastria ID) aims to provide users with secure control on their digital information and personal data, making it easier for them to manage their digital identity. The project that was initiated in October 2019, has successfully completed the concept testing phase and is in its second phase, with the final solution expected to roll-out in mid-2021.
Grayscale, is the first digital currency investment vehicle to attain the status of a Securities and Exchange Commission reporting company. The digital assets management company is aggressively buying bitcoins and manages a total of USD 8.2 billion of cryptocurrency. Earlier this year, Singapore’s Matrixport, a financial services firm partnered with Simplex, an EU-licensed payments processing firm to enable buying of cryptocurrencies via VISA or Mastercard credit and debit cards with more than 20 supported fiat currencies.
As Blockchain matures we will see more large-scale adoption bringing collaborators together to form ecosystems that will give them a competitive edge. Solve some of their core challenges and empower their customers.
Singapore FinTech Festival 2020: Infrastructure Summit
Get more insights into the evolution of blockchain and its applications at the Singapore FinTech Festival 2020: Infrastructure Summit. The world’s largest fintech event will explore different uses of blockchain technology, trials being conducted, and the vast opportunities in the financial services industries
