Crypto to replace traditional currency in 10 years, city businesses say

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More than three-quarters of UK financial services companies predict that digital assets will replace fiat currencies over the next five to ten years, amid growing demand for cryptocurrency and blockchain capacity in financial centers.

The City’s top executives are also more worried than their global counterparts that they will fall behind if they don’t embrace blockchain technology and digital assets, according to a recent Deloitte poll.

Interest in the sector has increased among financial services companies as the popularity of cryptocurrencies as an asset class gained ground with institutional investors, starting in October of last year. Major banks including Goldman Sachs, Citigroup and Morgan Stanley have announced developments in the space, although regulators have yet to take a firm stance on emerging technologies.

Data provided to Financial News by Deloitte showed that nearly 80% of UK financial services leaders believe digital assets will be very or somewhat important to their respective industries over the next two years.

Fears that the UK’s exit from the European Union would weaken the pound sterling has sparked corporate interest in a digital alternative to fiat, Charley Cooper, chief executive of blockchain company R3, told FN.

The rush for stability that followed, especially during the coronavirus pandemic, put digital assets high on corporate priority lists.

The past two years have put unprecedented pressure on London’s financial services industry and it’s no surprise the city has confidence in new technology. Brexit has called into question London’s status as a key financial hub, and the pandemic has shed light on the legacy processes that have underpinned financial markets for too long, Cooper added.

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UK businesses were also more optimistic than those in other regions about the potential uses of digital assets, with 48% of city leaders saying custodial solutions for cryptocurrencies hold promise for the industry, up from 45% in the world.

Using digital assets to diversify investments and portfolios was cited as a potential avenue by 41% of UK respondents, while 40% said they could be used to develop new payment channels.

Data from digital asset manager Nickel in June showed investment funds around the world held a collective bitcoin treasure trove worth over $ 43 billion in June, demonstrating the impact of cryptocurrencies on portfolio diversification.

Tyler Welmans, head of blockchain and digital assets at Deloittes UK, said the poll results showed broad recognition that we have entered the phase of widespread adoption of cryptocurrencies.

This has resulted in a change of gears among business and retail banking service providers, which are almost without exception accelerating the development of services such as custody and access to stock markets to meet the needs of existing and new customers, Welmans told FN.

Beyond crypto, advancements for other digital asset classes also continue with tokenized securities high on the agenda for many companies.

But without firm guidance from regulators on crypto and blockchain governance, widespread progress has been limited.

Almost 70% of finance executives told Deloitte that data security regulations need to be updated to meet new technologies head-on, while a similar number cited cybersecurity concerns as one of the main obstacles to the full acceptance of digital assets.

Deloitte said in its August report that financial services have been slow to grapple with the innovation issue, as regulators have yet to demand a response from them on the issue.

With disruption of digital assets rapidly fragmenting the market, global financial services are striving to reinvent themselves, building companies to replace dying revenue streams, report authors, led by global blockchain Deloittes and market leader, say. of digital assets Linda Pawczuk.

It’s no surprise, then, that banking executives have voiced concerns about digital assets in general and explained why regulatory protections are still needed.

The UK’s Financial Conduct Authority is still developing its future regulation of the sector, having already fallen behind in registering new crypto-related companies.

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He admitted in a June watchdog that some companies such as the Binance crypto exchange cannot be effectively regulated, due to the lack of information available on their global structure and governance.

It’s clear that the momentum given by the pandemic and Brexit is prompting many of the city’s financial institutions to explore the benefits that distributed ledger technology and digital assets can bring to stay competitive, Cooper said.

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To contact the author of this story with comments or news, email Emily Nicolle

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