The cover story intends to examine the significance of the latest technologies in the financial service industry. It also attempts to objectively evaluate the theoretical and historical significance of cryptocurrencies and shed light on trending topics in the fintech industry.

Fintech helps resolve some of the most complex problems related to trading and transaction if it stands by its foundational ideas. Considering the wide appreciation of cryptocurrencies such as Bitcoin, Ethereum, Solana, and several others receive along with blockchain technology, which enables the existence of cryptocurrency, one can easily guess that “fintech” revolutionizes not merely the online financial services but the digital economy as a whole!

Bigger and Broader Landscape of Fintech

The finance sector is interwoven with technology since its early stages to offer customers a better experience in terms of loans, trading, and transactions. The pace of the evolution in the financial sector happened faster than normal in terms of currency or check-based transactions to credit or debit card-based transactions across the globe. In parallel, customers are introduced to mobile banking, instant loans, online payments, and more.

When techfin enterprises i.e., Google, Amazon, Alibaba, Apple, and several others initiated digital transactions through stand-alone mobile apps and unified payment interfaces (UPI), the concept of fintech received wider appreciation. However, today’s landscape of fintech is incredibly broader compared to earlier predictions and calculations.

Bitcoin Disruption

The earliest decentralized digital currency, Bitcoin, ignited the financial revolution. The term revolution ideates as the exchanges of Bitcoin happen between users through peer-to-peer networks without an intermediary. All of these transactions are recorded in a distributed ledger, widely known as the blockchain, and verified by the network through cryptography. The crypto-blockchain ecosystem subverts central banks or similar institutions between transactions. Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto.

Distributed Digital Ledgers and Secure Financial Transactions

The blockchain ecosystem helps businesses develop apps and smart contracts and facilitate quick and secure transactions. It is essentially a digital ledger of enormous transactions and they are duplicated and distributed across the network of computer systems on the blockchain. All of the activities of blockchain are managed and administered using cloud-based service providers.

The distributed ledger technology (DLT) and the complexity it carries out to maintain decentralized records of transactions invalidate the scope of any financial frauds. Each block in the chain records several transactions, and every new transaction that occurs on the blockchain would have a “digital identity” along with the digital identity of the previous transaction.

The following are some of the vital properties of DLT:

• Programmable: The blockchain is programmable for smart contracts
• Secure: No scope for intrusion and fraud
• Anonymous: Users can protect their privacy
• Distributed: The copy of transactions is distributed and transparent to all participants in the block
• Unanimous: The participants in the network can agree to the validity of each record
• Time-Stamped: The transaction time is recorded in the block
• Irreversible: Any record that is validated cannot be changed

For organizations to involve in the modern methods of fintech, blockchain as a service (BaaS) is provided by many companies.

Data and Privacy Protection

One of the major takeaways of a blockchain-based transaction is it protects users’ privacy and curtails the exchange of unwanted user data between stakeholders.

The debate about privacy started on the first day of public access to the internet. Most websites, web-based service providers, social networking sites collect users’ data and use them for marketing purposes such as target-based and demographic-specific online advertisements. Many of these activities are often face criticism as they are driven based on the “digital identities” created after collecting data, including personally identifiable information (PII) from multiple sources. The internet privacy crusaders argue, “the compromise of user privacy fuels social disparities, discrimination, prejudice, and political interests.”

Crypto: The Future Currency?

According to CoinMarketCap, as of March 2022, there are over 18,000 cryptocurrencies in existence. Considering their active and valuable status, there are 10,000 of them are trusted by users. The global crypto market cap is $2.12 trillion and it has 4 percent of growth – even after accounting cryptos’ volatility. Bitcoin (BTC), Ethereum (ETH), BNB, and Solana (SOL) are some of the notable and high-performing cryptocurrencies in the market.

Sidharth Sogani, CEO at Crebaco, a crypto research firm, broadly identifies, “cryptocurrencies can be classified into different categories, i.e., DeFi, NFT, utility tokens, store of value tokens.” He further describes, “they’re easier for cross-border payments, cheaper and faster in transactions.”

One of the major questions raised so far on crypto is, can the cryptocurrencies define future transactions? Perhaps, it is too early to draw a conclusion on the subject considering the manner economists, observers, and governments across the globe raised eyebrows at the decentralized pattern of crypto transactions. However, it is important to analyze, objectively, based on the growth and acceptance of crypto and supporting blockchain technologies.

Nearly a decade ago, the crypto market was barely $10 million and today cryptocurrency market is worth over $2 trillion. Similarly, one bitcoin was equal to $1 in 2009 and now it is over $46,000.

Crypto Licensing and Adoption of Crypto Ecosystem

In February 2022, Bloomberg wrote, “the United Arab Emirates is poised to issue federal licenses for virtual asset service providers to attract some of the world’s biggest crypto companies,” sourcing an unnamed government official.

In an exclusive interview with The Integrator, Ola J. Lind, Director, at FTFT Capital, observed the rising future of fintech in the Middle East. He articulated, “The Middle East becomes one of the most significant fintech hubs.”

The following are the status of crypto usage in some of the key economies across the world and the information is partly accessed from ComplyAdvantage, a London-based RegTech firm.

Cryptocurrencies aren’t considered legal tender in the United States (US). However, the US continues to progress in developing federal cryptocurrency legislation. Cryptocurrency exchanges are legal in the US and fall under the regulatory scope of the Bank Secrecy Act (BSA).

Cryptocurrencies are not legal tender in Canada but can be used to buy goods and services online or in stores that accept them. In Singapore, cryptocurrency exchanges and trading are legal although cryptocurrencies are not considered legal tender. Singapore’s tax authority treats Bitcoins as “goods” and so applies Goods and Services Tax.

Cryptocurrencies and exchanges are legal in Australia and the government declared that cryptocurrencies were legal and specifically stated that Bitcoin (and cryptocurrencies that shared its characteristics). Japan currently has the most progressive regulatory climate for cryptocurrencies and recognizes Bitcoin and other digital currencies as legal properties.

China does not consider cryptocurrencies to be legal tender the Asian country banned all domestic cryptocurrency mining in September 2021. Regulations effectively banned the use of all cryptocurrency exchanges (foreign and domestic) in China.

Major Criticism of Cryptocurrencies

American business magnate, Warren Buffet, criticized in a CNBC TV interview, “when you buy non-productive assets, all you are counting on is whether the next person is going to pay you more because they are even more excited about another next person coming along. But the asset itself is creating nothing.”

Paul Krugman, the Nobel prize-winning economist raises concerns about energy consumption and a lack of government backing. He wrote, “twelve years on, cryptocurrencies play almost no role in normal economic activity. Almost the only time we hear about them being used as a means of payment — as opposed to speculative trading — is in association with illegal activity.”

Microsoft founder Bill Gates told The New York Times in an interview, “Bitcoin uses more electricity per transaction than any other method known to mankind.”

Conclusion

No matter how critics question the volatility of crypto, it gets improved attention; so, does blockchain technology. Currency in any form, physical or digital, is meant to measure value, therefore, it can’t afford to lose its practical value – institutions are required to reassure citizens that. Whether blockchain changes the transactions of the future or not, the decentralized and secure nature of financial activities, certainly, turns more heads and impacts the future.