The Impact of Crypto on the Fintech Industry and the Economy at Wider

Blockchain technology has grown in popularity and adoption in modern society over the last few years. However, for those Padawans who envision the Blockchain as a network of nano-bots poised to take over humanity, the Blockchain is essentially just a set of code that records events, with each record being unalterable.

These resources could range from storage space to a ledger of peer-to-peer cryptographic transactions that do not require the involvement of a financial institution as a middleman.

The Financial Technology Connection

But where does the Fintech connection come into play? Blockchain is a critical driver of efficiencies and effectiveness in an industry that relies so heavily on calculations and analysis.

Though still in its infancy, when it comes to adoption by centralized financial institutions, the Fintech revolution is raging, with users all over the world increasingly opting for Blockchain-powered cryptocurrency transactions to optimize their payment and transaction processes.

Technology’s Strong IT Infrastructure

Because of the rapid evolution of information technology over the last few decades, our world now has a robust IT infrastructure that spans all countries and continents, allowing us to use the high-speed internet to facilitate and optimize financial processes.

Fintech companies can now narrow their focus and focus on their mission of providing competitive and efficient financial services to their customers faster and more securely, thanks to Blockchain technology and decentralized Cryptocurrencies.

What Crypto Brings to the Fintech Table

Cryptocurrencies have yet to gain widespread consumer acceptance. However, they are quickly becoming an essential component of the financial ecosystem.

Cryptocurrencies appear to be the ideal solution for countries lacking a stable currency (e.g., El Salvador, also known as Bitcoin City).

Crypto can be a huge asset in such countries, but it can also be a global asset.

However, given the speculative nature of cryptocurrency, relying too heavily on its value rather than fiat money (a legal tender used by governments) may prove problematic.

While several governments have banned or regulated the use of cryptocurrencies, widespread adoption of crypto could render traditional banks obsolete and even cause a loss of faith in the concerned country’s paper currency.

Cryptocurrencies provide significant value to Fintech institutions

Having said that, cryptocurrencies provide significant value to Fintech institutions. Let’s take a look at what cryptocurrency has to offer the Fintech industry.

1. Assists in the opening of new markets

Cryptocurrency, also known as cryptocurrency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions, according to Kaspersky.

Because of a lack of information, the average bank customer may not understand crypto and may be hesitant to invest in cryptocurrencies. This skepticism of cryptocurrencies is most visible in developing countries with a relatively stable national currency.

As previously stated, cryptocurrencies are widely used in countries with unstable currencies. Venezuela’s currency, the Bolivar, is one example. When it experienced massive depreciation, Venezuelans shifted to cryptocurrencies, which were a far more reliable option.

Massive Growth in the FinTech Industry

The FinTech industry has grown significantly in recent years and is expected to reach $158 million by 2023, with crypto transactions accounting for a sizable portion of this total.

Another area where cryptocurrencies can help people gain access to financial and Fintech services is the target group of people who own smartphones but do not have bank accounts.

This ‘unbanked’ group numbers around 1 billion people, providing a massive market for crypto-powered Fintech services to roll out products and services that were previously unavailable to these customers.

2. Quick Money Transfer

Transaction approval is excruciatingly slow in traditional financial institutions. The transaction must be approved at multiple levels of government bureaucracy. When it comes to transferring funds across borders or between organizations, the process becomes even more complicated and time-consuming.

Traditional money transfers are plagued by inefficiencies and delays, making cryptocurrency transactions a far more appealing option.

Cryptocurrencies are based on a distributed ledger. They can be moved much more quickly than traditional currencies, which must pass through financial institutions on both ends. The elimination of a middleman, in this case, middlemen, reduces the cost of such transactions dramatically.

Convenience, speed, and transparency are critical components of Fintech innovation, and cryptocurrency can provide transactions that meet these criteria.

3. Lowering the risk of fraudulent activity

Fintechs are market disruptors, but they continue to face legacy financial institution issues such as identity theft, fraud, money laundering, and so on. Dealing with such issues is difficult and time-consuming.

Because cryptocurrencies are built on decentralized ledgers, it is easier to verify transaction records. Blockchain technology is extremely secure. Because Blockchain documents cannot be manipulated or removed, Fintechs can more easily prevent fraudulent activity.

In the financial sector, fintech innovation has become a force to be reckoned with. Financial products and services have recently evolved into pro-Fintech solutions, providing customers with several appealing alternatives to traditional banking products and services.

“Regulation is probably one of the biggest overhangs in the crypto industry globally,” says Jeffrey Wang, head of the Americas at Amber Group, a Canada-based crypto finance firm.”


4. Blockchain as a Storage Medium

Data management systems have a significant positive impact when powered by Blockchain service administrations. Supporting in-house/traditional data management capabilities, on the other hand, can be costly.

Fintech companies can save money on purchasing, installing, maintaining, and upgrading the necessary IT infrastructure for their on-premise servers by outsourcing these services to a Blockchain partner.

The Blockchain enables Fintech institutions to secure their data assets more effectively and securely than the traditional route of owning all resources required.

Even when investigating the cybersecurity aspects of the company’s data, the decentralized nature of the Blockchain is the safer option due to the strict protocols they implement and the security measures they take.

In the coming decade, cryptocurrency is expected to play a significant role in the development of Fintech services and products that will open doors to new markets provide unrivaled efficiency and know your customer regulations in crypto exchanges.

The crypto ecosystem is quickly becoming a high-value financial market, thanks to quick and easy payments, innovative services and products, and accessibility to the ‘unbanked’ population.

What Are the Risks of the Crypto Ecosystem?

As with everything else, the benefits and opportunities of cryptocurrencies are accompanied by significant risks and challenges.

The global value of crypto assets has surpassed $2 trillion as of September 2021. This represents a tenfold increase in less than a year. Furthermore, the crypto ecosystem as a whole thrives with various services and products such as wallets, exchanges, miners, and stablecoin users.

1. Inefficiency in operations-

Unfortunately, the majority of these entities lack the necessary governance and risk mitigation practices.

These crypto organizations’ operational activities are mostly suboptimal, and the flaws in their security structure become even more visible during market turbulence. During difficult times, many crypto assets may experience massive price fluctuations.

2. Hacking Threats

In the crypto ecosystem, the threat of hacking is real. However, while high-profile cases such as Mt.Gox and Allinvain demonstrate the vulnerabilities of cryptocurrencies, the risk involved has not yet reached a level that could jeopardize financial stability.

However, as cryptocurrency adoption grows, the potential consequences of such hacks in the broader economy may become far-reaching. Furthermore, consumer protection risks increase as a result of inadequate/limited disclosure.

Over 16000 tokens were listed on various exchanges, with only 9000 remaining today. 7000 Tokens have vanished, resulting in a significant loss of customer assets. Many tokens were created for purely speculative purposes or for direct fraud.

3. Asset Utilization

Because crypto asset holders remain anonymous, data gaps can facilitate illegal activities such as terrorist funding, money laundering, and the purchase of illegal substances and items, to name a few.

The Blockchain allows authorities to track such transactions; however, the perpetrators get away with it because each country has its own regulatory framework, giving perps a lot of leeway.

The majority of crypto exchange transactions take place through offshore financial centers, making supervision and law enforcement a difficult task that necessitates international cooperation (something every forward-thinking being has wanted since time immemorial)

4. The Rise of Stablecoins

Stablecoins are cryptocurrencies that aim to peg their value to a popular currency, most commonly the US dollar. As a result, the number of Stablecoins is rapidly increasing.

It is notable; however, the term “stablecoin” can be applied to a wide variety of crypto assets, and it can be very misleading.

Stablecoins are subject to bull runs based on their reserves, which could have a negative impact on the financial system. These runs could be triggered by investor concerns about the coin’s reserves’ authenticity or the speed with which potential customer redemptions are liquidated.

The Upcoming Obstacles

The adoption of crypto assets cannot be accurately measured. However, surveys show that emerging economies are leading countries in the adoption of cryptocurrencies. In developing countries such as India, there has been a significant increase in crypto exchange trading volumes over the last year.

1. Cryptography

If opt-ins for crypto-assets continue to rise, it may reinforce cryptoization (akin to dollarization) in the global economy in the future. The ability of centralized financial institutions to implement monetary policy would be hampered as a result.

Overadoption may have an impact on financial stability by increasing solvency risks caused by currency mismatches, in addition to the consumer protection risks mentioned previously.

2. Fiscal Policy Threat

Given the ability of crypto-assets to facilitate tax evasion, the threat to fiscal policy may also increase.

The profit a government makes from printing money in relation to its actual value (seigniorage) will also fall. Furthermore, increased demand for crypto assets may result in capital outflows, which could impact the foreign exchange market and jeopardize the country’s economy.

3. Energy Consumption

The vast majority of crypto mining is currently based in China. Domestic energy consumption, on the other hand, could see a significant increase as these activities migrate to other developing economies and emerging markets.

Countries that rely on CO2-intensive energy or governments that subsidize energy costs may suffer as a result of the massive amount of resources required by crypto mining.

What Can Be Done- Policies and Takeaways

1. Law enforcement and supervision

Every development in the crypto ecosystem must be monitored by supervisors and regulatory authorities. Any data gaps should be addressed and bridged as soon as possible.

Given that cryptocurrency is a global phenomenon, governments and policymakers should be prepared to collaborate across borders in order to reduce the risk of regulatory arbitrage and to put adequate supervision and enforcement systems in place for crypto exchanges.

2. Normalization

The adoption of global standards is an absolute necessity. While most national regulators’ current laws focus solely on money laundering and bank proposal exposures, other aspects such as the regulation of securities, payments, and settlement payouts should also be prioritized.

As the use of stablecoins grows, proportionate regulations are being implemented to mitigate the risk they pose to economic functionality. In short, the same rules that apply to traditional financial institutions should apply to crypto entities that provide similar products.

3. Improving Macroeconomic Policy

The dangers of cryptography are real. Weak central bank credibility, flawed banking systems, ineffective payment systems, and limited access to financial services all play a role.

Respective governments must strengthen their macroeconomic policies and consider the advantages that a CBDC (central bank digital currency) can provide, such as improved payment technologies and reduced cryptoization.

Policymakers must use the G20 Cross Border Payments Roadmap methodologies to build faster, cheaper, more secure, inclusive, and transparent cross-border payments.

The clock is ticking, and the need of the hour is decisive action, a swift and well-coordinated global strategy to ensure that the benefits of crypto are distributed while its vulnerabilities are mitigated.


The guidance and regulatory requirements demanded by digital assets are still insufficient, causing financial institutions to be wary of the concept of cryptocurrency. While banks are hesitant to enter the crypto space due to security and stability concerns, Fintech firms have long since joined the crypto bandwagon.

While traditional financial institutions debate whether to take the plunge, they should instead prepare to accept cryptocurrency as the world’s latest and hottest Fintech trend.

There is the possibility of criminal activity in the Crypto ecosystem. However, simply because there are entities with malicious intent present does not justify ignoring the power of this technology.

Cryptocurrency has a large potential for economic growth, which should be considered. Instead of dismissing the concept, policymakers should develop standardized compliance guidelines to assist traditional banks in joining the brigade.

Where Will the Mindset Shift Take Place?

Traditional financial institutions, which see cryptocurrency as a threat rather than a partner, must change their mindset. Banking and Fintech were initially criticized, but now, just a few years later, these industries are thriving contributors to the global economy.

Banks’ Expanded Role in the Cryptosphere

The need of the hour is for banks to play a larger role in the cryptosphere. Their presence will provide assurance, security, and gravitas to the unregulated crypto environment (one of its greatest drawbacks).

Financial institutions can streamline their processes and take banking to the next evolutionary stage in terms of innovation and efficiency by adopting cryptocurrencies and blockchain technology.

Learn more from Crypto and read Ways to Avoid a Fake Crypto Exchange.

John Harper

#1 File Information bestselling author John Harper loves to dispel the myth that smart men & women don’t read (or write) romance, and if you watch reruns of the game show The Weakest Link you might just catch him winning the $77,000 jackpot. In 2021, Netflix will premiere Bridgerton, based on his popular series of novels about the Why Files.

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