The potential impact of cryptocurrencies on the financial sector is immense. This technology is designed to be decentralized, with various “layers” cooperating to create a platform on top of which one can build products and services. Currently, the two most widely adopted cryptocurrencies are Bitcoin and Ether (the currency that is used to power the Ethereum blockchain).
China Puts the Brakes on Cryptocurrencies
Cryptocurrencies are currently experiencing ups and downs. Bitcoin recently rose to a record high price above $4000, but the high growth trend has been hit by news this week that China has banned and deemed illegal the practice of raising funds through launches of token-based digital currencies through initial coin offerings (ICOs). In total, ICOs have raised $2.32 billion to date, with $2.16 billion of that being raised in 2017, according to the cryptocurrency analysis website CryptoCompare.
This may only be a temporary move, as regulators work to better understand the technology and all its implications for the modern economy. According to Zennon Kapron, the director of the Shanghai-based financial technology consultancy Kapronasia, “China, in many ways, is no different than the U.S. or Singapore in saying, ok, we need to push back on these for now until we figure out how to deal with them…I think it will be slightly a temporary measure.”
China Bans While Millennials Embrace
While regulators are putting the brakes on cryptocurrencies, a new generation of consumers – the millennials – are excited to adopt this new technology which offers many of the features they have come to expect. Businesses can use new technologies to provide enhanced accessibility and experiences to these customers. As Ryne Landers of Reap Marketing has stated: “Greatly improved software designs and user experiences, fast internet bandwidth, and the universal adoption of smartphones has provided real-time access to financial information and transactions at a level never before possible. This has led to the rise of omnichannel payments processing, mobile banking, peer-to-peer payments, and even new ways of evaluating credit applications.”
Moreover, cryptocurrencies provide transparency and security that will appease all stakeholders. The New York Times recently explored the appeal of cryptocurrencies to millennials: “Unlike previous generations, many of these greenhorn investors don’t have pensions or 401(k)’s, are mistrustful of socking money away in mutual funds and are fully accustomed to owning digital assets that have no concrete properties. As traditional paths to upper-middle-class stability are being blocked by debt, exorbitant housing costs and a shaky job market, these investors view cryptocurrency not only as a hedge against another Dow Jones crash, but also as the most rational — and even utopian — means of investing their money.”
How Will Millennials Benefit?
Cryptocurrency presents investment opportunities and enhanced financial products and services for millennials. It is seen as a way to cut costs and decrease risks for the financial sector and provide new opportunities to decrease opacity in this market for regulators.
Cryptocurrencies can enable a new simpler decentralized financial system that removes layers of intermediation. According to HBR, cryptocurrencies could help insure against risk, and through moving finances in various ways, they could open up the possibility for a number of different financial products. Cryptocurrencies could also open up the financial system to those who are currently excluded, lower the obstacles impeding entry, and allow more competition. HBR believes that “regulators could remake the financial system by rethinking the best way to achieve policy goals, without diluting standards.”
Beyond the potential financial rewards, many view cryptocurrencies as a vehicle for social change, and have been encouraged by governments and financial institutions around the globe. The new opportunities enabled by cryptocurrencies may radically alter not only the fintech landscape, but the way modern society operates in the years to come.
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