The crypto industry has entered difficult times. Hit by crises among some of the industry’s major players in 2022, confidence has waned and DeFi has yet to return to its former glory.
Additionally, regulators around the world have intervened. The United States has taken several enforcement actions against crypto companies throughout 2023, and this is expected to continue. David Hirsch, head of the Crypto Assets and Cyber Unit of the SEC’s Division of Enforcement, warned last week, the agency is considering taking more enforcement action against the crypto industry. “We’re going to continue to make these charges,” Hirsch said, explaining that non-compliance in the industry extends beyond the major exchanges the SEC has litigated so far.
However, stories that seem to run counter to this application model continue to arise, increasingly extending into the traditional financial sector. Amid the regulatory noise and reports of DeFi moving overseas, PayPal launched a stablecoin, investment banks filed for Bitcoin ETFs, and Coinbase struck new partnerships.
“From the launch of PayPal’s stablecoin, to the announcement that Visa has allowed Ethereum users to pay for gas fees using their Visa credit and debit cards, to yesterday’s announcement that The US Federal Reserve has integrated a blockchain-based payment provider into its FedNow network, a quiet revolution is happening in blockchain payment infrastructure,” said Gero Piskov, head of cards and payments at the digital wealth platform Yield App.
The SEC may not be convinced, but the financial industry appears to be moving forward regardless, driving mass adoption.
The appeal of blockchain
Blockchain, as we now know it, was developed from the ashes of the 2008 financial crisis, based on an idea described in 1991. Outlined in a white paper, Satoshi Nakamoto talked about creating a peer-to-peer payment system that bypassed financial intermediaries . This forms the backbone of cryptocurrencies and the DeFi industry dream.
DeFi has leveraged the cross-border capabilities of blockchain. Moving cryptocurrencies could be fast and frictionless, regardless of the location of the sender and recipient. Although the decentralized nature of the new financial system posed challenges for integration into the traditional financial sector, the potential of the technology was clear.
“This solves a problem,” said Brendan Berry, head of payments products at Ripple. “When you think more broadly about blockchain or crypto, in many cases there is not yet a better technological solution to the major fundamental problems that exist in the space…this represents an opportunity to really be a powerful solution and alleviate many problems. pain.”
He explained that despite the lack of regulatory clarity in the area, these issues were reason enough for financial institutions to continue exploring blockchain applications.
“It’s often much quicker to take a bag of cash on a plane than to use an international wire transfer to move those funds,” he continued. “This is because there are inefficiencies in these systems and financial institutions are responsible for the difficulty associated with moving currencies between institutions and between different systems.”
Blockchain represents a mechanism to bring transparency, speed and efficiency to the payment system, he continued.
Driving Crypto Adoption Despite Regulatory Issues
Widespread adoption still eludes the crypto industry despite the benefits of blockchain. While the number of active crypto wallets is constantly increasingthe use of crypto in everyday payments is rare.
“Cryptocurrency will not achieve mass adoption, or even widespread adoption, until it can be used effectively as a means of payment,” Piskov said. “There are far too many bottlenecks in the cryptocurrency onboarding process. It remains very difficult for the average person with no knowledge of blockchain infrastructure to fully interact with cryptocurrency – and will remain so until we have meaningful payments infrastructure in place.
He explained that although companies have tried to reduce friction, each solution has its own drawbacks. However, as more established TradFi players enter the space, the line between the crypto industry and traditional finance is becoming increasingly blurred.
In the case of PayPal, the company is already a trusted global payment provider with a user base of 435 million users. Adoption of its newly launched stablecoin has been slow, but the company is encouraging adoption. He announced last week that the PYUSD would be available on Venmoa payment application used daily by millions of consumers. The company said stablecoin payments between Venmo and PayPal accounts would be free, and payments would also be available to third-party wallets and merchants.
“These silent key infrastructure integrations are what is really needed to move blockchain and cryptocurrency forward,” Piskov concluded.