FIVE new fintech trends to watch in cryptocurrency and DeFi

Crypto investing was once the forte of experimental risk-takers seeking a wild west approach to fortune hunting. As the space evolved, it has garnered increasing interest from established investors and incumbents. Though a lack of regulation within the industry is still a factor in preventing its complete transition to the mainstream, progress is being made.

The process has been hampered by several crypto winters over the past few months that have seen the value of investments crash and armchair investors wringing their hands. But now is not the time to turn our backs on the heady crypto space, as new developments and trends look set to stabilise and energise digital currencies.

#1 Crypto exchanges are offering more choice

Today, more hobby-investors than ever before are dipping their toes into the crypto space through well-established crypto exchanges that offer advice and navigation through the tricky DeFi landscape. 

Data shows there are as many as 20,268 digital currencies in existence, though currently, less than 500 of them are considered tradeable via an exchange. Crypto exchanges only trade certain types of crypto, but the spectrum is widening, which opens up a more diverse market for investors. 

The biggest names in crypto exchange usually provide the most choice. For example, Kraken and Coinbase are known for their wide spectrum of coin trades, with Coinbase currently trading over 450 different cryptocurrencies, while Kraken will trade 160. Robinhood, meanwhile, focuses on the few, prominent currencies, but does offer commission-free trading on some coins. 

#2 Crypto regulation is tightening up

According to Todd Crosland, CEO of CoinZoom – the crypto-to-cash conversion fintech – regulation will be the mainstream driving force. “Some in the crypto space virulently oppose regulation, arguing that it would hinder innovation and contradict the very decentralised foundations upon which cryptocurrencies were built. In this scenario, financial task-forces would take a hands-off approach, leaving the industry to self-regulate.”

Crosland argues that the implementation of a clear and well-developed set of regulations will be critical for integrating cryptocurrencies into the global financial system. “For the industry to continue to grow and become mainstream, customers must have trust in the infrastructure and framework underpinning it – and it starts with regulation.”

He points out that trust cannot be founded in an environment that “permits bad actors to roam freely”. Indeed, the UK’s Financial Conduct Authority (FCA) recently reported a 100% increase in alleged crypto-related scams in 2021 compared to 2020. The cost of cryptocurrency fraud also amounts to US$19.2bn worldwide. 

Such eye-opening data, he believes, is a clear driver for change. “Clear accounting rules are critical to achieving this, not only helping companies shape their crypto strategies, but also providing them with the tools they need to make crypto a safe and orderly marketplace for investors.” 

#3 Cryptocurrency insurance is a growing trend

More and more insurance providers are recognising the need to provide protection options when it comes to digital assets. 

Breach Insurance is an insurtech startup that provides insurance technology and regulated insurance products for the crypto market. The company’s Crypto Shield product is available for more than 20 cryptocurrencies and for consumers using Binance US, Coinbase, CoinList, and Gemini. It is also backed by a premier insurance carrier and reinsured by a global crypto insurance industry leader.

Co-founder Eyhab Eejaz explains: “We don't opine on whether crypto is a security, a currency, something more like gold, or whether it's property. Our position is that it's a thing that people choose to buy and own. It's not illegal because governments tax you on it. Last time I checked, they don't tax you on drugs or something more illicit. So, it's undefined, but it's something that people have an appreciation for – so much so that they choose to put part of their wealth into it.”

#4 More countries are adopting crypto

There are still lots of countries globally that don’t tolerate the use of cryptocurrency. But this is slowly changing. For example, according to the Thomson Reuters Cryptos Report Compendium of 2022, crypto is now far more widely accepted globally than it once was. Only a smattering of nations remain closed to it. For example, the Bolivian government banned cryptocurrencies in 2014, believing it would instigate economic instability and tax evasion. “It is illegal to use any kind of currency that is not issued and controlled by a government or an authorised entity,” Bolivia’s central bank11 (BCB) said. 

But El Salvador adopted Bitcoin as legal tender in 2021, Brazil has embraced the digital currency market in response to fiat currency instability, and, in December 2022, a new cryptocurrency law was introduced in Peru, which will define crypto assets and regulate crypto transactions. Called the ‘Crypto-asset Marketing Framework’, the law is, according to the report, “seen as a first step to establish regulatory clarity for virtual asset service providers and others involved in blockchain and cryptography”.

#5 The Metaverse is the perfect home for crypto

Meanwhile, in the Western Hemisphere, digital currency is here to stay and is forging new innovations in gamification, online retail, and through opportunities in the metaverse. 

As Manish Patni, Lead Product Manager of Europe for Finacle, points out: “A recent report by J.P. Morgan has estimated the market and business opportunities for companies in the metaverse at over US$1tn in annual revenues, while the Zion Market Research study claimed that the metaverse market is expected to grow at 39.5% CAGR to touch $400.5bn by 2028.”

He says that digital platforms and tech giants are preparing for the metaverse, which it is predicted will have an economy worth $13tn and five billion users by 2030.

With so much transition taking place, cryptocurrency adoption globally will continue to increase. “Banks and fintechs have the potential to lead, as the world has shifted to digital interactions and the adoption of digital fintech solutions due to the pandemic and subsequent lockdowns. The trend is likely to continue in the metaverse, where fintechs will drive most financial transactions.”