Clear Junction CEO talks Crypto Payments Progress in 2022

The world of crypto and digital currency has taken a hammering lately, with many experts warning of a 'crypto winter'. But regardless of the marketplace volatility, new innovations in security, regulations and developments in the space mean digital currencies and DeFi is here to stay. Furthermore, today, the marketplace fluctuations have actually resulted in identifying the most stable of cryptocurrencies. Bitcoin remains the most popular - and is already going mainstream as more and more vendors enable crypto payments for goods and services on a global scale. 

We caught up with Clear Junction CEO, Dima Kats for a discussion on the role crypto will play over the next few months and how the global payments scene is developing. 

How would you define the digital currency marketplace at this time?  

The rising price of bitcoin during the pandemic has renewed interest in digital money - and the digital currency market is booming.   

Currently, the digital currency marketplace is undergoing rapid change and innovative tools are emerging. Not so long ago, cash was more or less the only way to make an immediate purchase. However, in the post-covid era, we are now accustomed to using forms of private digital money such as online bank transfers, payment cards and applications on our smartphones or watches.

These are changes that directly affect the role of central banks.  While it is unlikely that digital currencies will completely replace existing currencies, the emergence of ‘cryptocurrencies’ and ‘stablecoins’ has prompted the exploration of central bank digital currencies in 2022. 

How do you think cryptocurrency will progress over the next few months? 

Last year, we saw bitcoin hit an all-time high price, which resulted in additional high-net-worth institutional buy-in from influential organisations. Ethereum, the second-largest cryptocurrency, got its new all-time high late last year as well. US government officials and the Biden administration have increasingly expressed interest in new regulations for cryptocurrency.  

But will 2022 be a big year for cryptocurrency? The short answer is no one knows. We can speculate on what value cryptocurrency may have for investors in the coming months. Still, the reality is crypto is such a new and speculative investment with little history on which to base predictions.  

However, the many success stories being written about in the media have not gone unnoticed. Many international organisations across multiple industries have now taken an interest — and sometimes, made investments. Over the next few months, we will probably see more significant investments into cryptocurrencies from major banks. AMC bank (a subsidiary bank of Lloyds Banking Group) recently announced it would accept bitcoin payments by the end of 2022. In addition, fintechs like PayPal and Square are also seeking to capitalise on cryptocurrencies by allowing customers to buy on their platforms.  

Yes, we've seen a tremendous amount of attention, and that's going to continue to drive the industry's growth – and over the next few months, we could see bigger, global corporations start to adopt cryptocurrencies even more. 

What influences are driving these changes? 

Over the last two years, the need for digital currencies has been driven by the rapid digitisation of global economies, the prioritisation of real-time payments and settlements, and the need for more efficient domestic and cross-border monetary interactions. The International Monetary Fund (IMF) recently stated that centralised technologies, such as cryptocurrencies and central bank digital currencies (CBDCs), can reduce expenses, facilitate seamless flow of money, and provide consumers

 with safer access to capital through digital channels.  Ultimately, digital currencies can provide a more resilient payments landscape, supporting competition, efficiency, controls and innovation in payments. They would also address declining cash usage by improving the usability and availability of legitimate central bank money. 

Name three trends that will reshape the global financial markets over the next few months 

Firstly, globalisation will continue at a faster pace . In 2022, we will see globalisation continuing to shape the market landscape. With the world coming out of the depths of the pandemic, the processes that come with globalisation are getting faster, which will directly affect the finance and payments industry in 2022. The pandemic forced people to take their spending habits online, which has created more opportunities for cross-border trade.   

In Europe, the online cross-border market increased by 35% in 2020 compared to the previous year. But this isn’t only happening in Europe; the internet opens the cross-border market worldwide. Some countries are going to thrive

 off this better than others. For example, PwC discovered that 78% of senior financial services executives believe the rest of the world will struggle to keep up with Asian organisations’ pace on globalisation. This is because Asia is the world’s largest regional economy and, as its economies integrate further, it can fuel and shape the next phase of globalisation.      

Secondly, cryptocurrencies will become more accepted in 2022. Crypto companies will be seen as less speculative, opening the finance industry up to the non-speculative users of cryptocurrencies. Crypto was ranked fifth with 28% of respondents who saw cryptocurrencies as a top concern in a survey conducted by PwC and banks are looking to increase their investment in fintech for that exact reason. In a study carried out by the Bank for International Settlements (BIS), 60% of central banks are beginning to consider introducing CBDCs.  

The pandemic could be attributed to this more serious acknowledgement of fintech as the world has shifted to an entirely digital way of working. Now the foundations and thinking are in place; it is just  a matter of putting the plans in place for the transition to be made.    

Thirdly, open banking partnerships will help to keep products relevant. The finance and payments industry has seen a growing demand for partnerships due to increased services provided in 2021. As the world becomes more diverse, we're seeing more opportunities that will become achievable via these partnerships.

Where does Open Banking fit in the crypto space? 

Last year saw an evolution in open banking systems, which will cause open banking players to become more dominant throughout the merchant services world in 2022. We're seeing this newfound power emerging as traditional firms begin to see open banking as something more approachable due to the opportunities that partnerships can trigger.    

The rise of partnerships within the finance industry began to take place long before the ongoing pandemic. Currently, over 30 partner banks represent hundreds of fintech relationships and financial services. I think firms who neglect open banking and partnerships will see themselves getting left behind. With this will come a massive loss in profit, which will devastate organisations. Considering the number of obstacles, the pandemic has created over the last 18 months, I don't think companies can deal with the financial adversity this neglect could bring.