Is Bitcoin coming to the bank?
It’s a real race the banking industry’s taking on. In 2019 the explosion of the FinTech sector, i.e. of digital financial operators, has put the appeal of the traditional system to the test.
Realities like Revolut are very successful among millennials as they represent a simpler, more immediate and practical alternative to ordinary banks. It is no coincidence that Revolut gives the possibility to buy cryptocurrency as a form of investment (even if it does not guarantee the possibility to transfer them, as an exchange does).
Millennials are certainly one of the most important target segments for banks, since they represent an entire generation on which they are gradually losing engagement.
A survey conducted by Deutsche Bank Research on 3,600 clients in China, France, Germany, Italy, the United Kingdom and the United States reveals that millennials see a future dominated by a purely digital currency. The majority of millennials believe that cryptocurrencies will be good for the economy and said they have already bought and sold at least one cryptocurrency, claiming it is a more attractive investment than a Netflix share, despite the fact that the company’s stock returns have reached +4.177% in the last 10 years.
More than a third of millennials believe that cryptocurrencies are already replacing cash. Will 2020 be the year in which Bitcoin and cryptocurrencies become an investment option even for traditional financial operators, gaining global recognition?
Nations build regulations
Governments and regulators are on the move to design a regulation of the crypto sector in a short time. Let’s take a quick tour of the world and see what happened in 2019:
- Europe has introduced the 5AMLD, Europe’s fifth anti-money laundering directive. All platforms for buying and selling cryptocurrency must register with national financial regulators. Young Platform has already complied with the legislation.
- Stablecoins are in the spotlight of the G7 nations, which means that guidelines or laws to regulate them could be issued in 2020.
- Japan has passed a cryptocurrency bill that strengthens the current measures in place. Japan was the first country in the world to enact a law defining virtual currency as a “legal term” and since 2015 requires exchanges to register as Exchange Service Providers in order to operate nationwide under anti-money laundering and anti-terrorism regulations.
- China is investing huge amounts of capital to test the applicability of Blockchain technology. The government, without a formal announcement, has also said it wants to launch a national virtual currency with the People’s Bank of China (PBoC). If this happens as planned, China will be the first economic supremacy to have a proprietary digital currency. This will drive other countries to create their own digital currencies. A digital currency issued by the Chinese government could become a very powerful political and economic tool.
- The Reserve Bank of India has banned any activity involving cryptocurrencies and imposed to stop any kind of commercial relationship with companies in the sector.
- The Securities Commission of Malaysia has authorized 3 companies to create and manage a cryptocurrency exchange on the national territory.
- The South African Reserve Bank (SARB) also prevented any activity related to cryptocurrencies.
While some countries with a historically strong banking sector are considering cryptocurrency, Asia is still moving faster. The question, therefore, is which country will be the first to obtain licenses and build partnerships with players such as mobile payment apps (Alipay, WeChat Pay, Apple Pay, Google Pay), credit card providers and worldwide retailers (Amazon, Walmart).
Assuming that governments are going to support cryptocurrencies, that markets stabilize, and that consumers and merchants can get advantages from using these new currencies, then the increase in adoption rates will quickly lead to a use of cryptos close to that of traditional currencies. We are still at the beginning, but if current trends continue, by 2030 there could be two hundred million Wallet users on the Blockchain.
New investment methods in crypto projects
2017 was the year of the ICOs. An ICO (Initial Coin Offering) is a public crowdsale in the world of cryptocurrency.
When a project wants to launch its own cryptocurrency, it can open an ICO to attract investors to its ecosystem. Companies have been able to raise millions of dollars in a few days thanks to ICOs: in 2017 they raised a total of 5.6 billion dollars.
The success of this funding formula, however, seems to be at an all-time low.
A new declination of this model is the IEO, an acronym that stands for Initial Exchange Offering, a fundraising event that is administered by a cryptocurrency exchange. Unlike an Initial Coin Offering (ICO), where the project team conducts the fundraising, in an Initial Exchange Offering the fundraising is conducted by a well-known exchange, where users can buy tokens with funds directly from their wallet.
It is easy for a user to participate in an IEO: they just need an account on the exchange, some funds deposited into their account and a simple transaction.
The exchange that hosts the collection meticulously selects the projects, thus ensuring their reliability. The platform, in fact, relies on the success of the fundraising and of the project, thus putting its reputation on the line.
From the perspective of a new-born project, an IEO is advantageous because it promises an immediate userbase and, depending on the size of the exchange audience, reduces the workload, allowing the project team to focus only on product development.