Today more and more blockchain and crypto-related projects are entering the financial market offering competitive advanced services.
Innovations around blockchain and crypto tech have been on the rise since Bitcoin’s first transaction a decade ago. Despite the regulatory hurdles, this industry emerged as a force to reckon with especially after Facebook’s digital currency proposal Libra.
More so, a number of blockchain and crypto oriented projects are popping up in relation to the financial services industry. Some have actually proven their use case while others happen to be crypto scams disguising as ICO projects. This has since forced regulators across the world led by the U.S. SEC to take swift action in fraud elimination.
Nonetheless, they’re currently a few innovations leveraging blockchain and crypto whose integration has been quite smooth.
Crypto/Fiat Debit Cards
Cryptocurrencies were born to revolutionize the financial sector by reducing transaction costs, introducing privacy, and improving on convenience. However, to build a bridge between these two worlds, crypto debits cards are steadily taking their place in the financial system.
Let’s sample two of them:
The fintech firm is based in London and has been in existence since 2015. Plutus awards its users with its native PLU loyalty token each time a user puts the debit card into use. Notably, Plutus recently increased its PLU rewards to 3 percent of the total purchase value. Interestingly, instead of Plutus managing users’ access to their cryptocurrencies, the debit card applies a noncustodial approach letting its users have complete control of their cryptos’ private keys.
Apart from allowing topping up with ETH and PLU tokens, the debit card supports fiat top-up of EUR or GBP. Plutus views itself as being better than a bank. To bring it closer to daily usage, Plutus card users can use the card to pay for goods and services in more than 400,000,000 merchants supporting Visa worldwide.
An additional new feature on Plutus is the account tier system which has starter, premium and pro account levels. The difference between these tiers is the trading limits, conversion fees, and access to cash-back on selected retail partners (such as Airbnb, Nike ID, and Skyscanner). Also, Plutus has introduced a cash-back program and developed a decentralized exchange, PlutusDEX, to help users exchange crypto for fiat and vice versa.
Wirex is a contactless visa card that supports conversion from a host of cryptocurrencies. Based in London, the financial technology company has processed transactions worth 2 billion U.S. dollars. The debit card gives back 0.5 percent Bitcoin when a user uses the card for in-store purchases. This feature is supported by Wirex’s Cryptoback program. The card attracts a card maintenance fee of between 1 and 1.50 Euros.
Gold-backed cryptocurrencies have removed the most feared aspect of cryptocurrencies – price volatility. This feature has prevented the mass adoption of cryptocurrency either as an investment or to pay for goods and services.
Fortunately, gold-backed virtual currencies can be used both as an investment and for day-to-day usage because they are pegged to actual gold which has consistent price stability.
Examples of gold-backed cryptocurrencies include, but not limited to:
1. Sudan Gold Coin (SGC)
With a holding company in Estonia and operating companies in UAE and Sudan, SGC explores the massive but highly unexploited gold deposits in Sudan. According to their whitepaper, each SGC coin is backed by 0.002 grams of pure gold which has a fiat value of 0.1 US dollars. SGC evenly distributes 30 percent of all gold mined in every quarter to those holding SGC coins.
With a special debit card, holders of SGC coins can effortlessly cash in and out allowing them to use their coins to pay for goods and services. Presumably, the SGC debit card wants to enter the digital payments space which, according to Statista, is expected to reach 6,699,201 million US dollars’ worth of transactions by 2023.
2. Gold Bits Coin (GBT)
GBT has its roots in Australia and is built on the Ethereum blockchain. The crypto focuses mainly on developing a utility coin that can be used to pay for goods and services either on physical or online stores.
3. AurumCoin (AU)
AU has a ratio of 1:0.75 to gold meaning that each AurumCoin is backed by 0.75 grams of physical gold. However, AU’s par value is maintained at a ratio of 1:1. AU’s physical gold is securely held in vaults located in Singapore, Toronto, Hong Kong, New York, London, and Zurich.
Digital currencies with Bitcoin at the forefront have been hailed as a solution to costly and slow fiat transactions. An emerging trend of Bitcoin ATMs, however, shows that the two forms of money will inevitably merge. This BTC innovation allows interested buyers to acquire the crypto coin through debit or credit cards backed by the likes of Visa and Mastercard. As of press date, they’re over 6,000 Bitcoin ATMs globally with Nigeria being the latest country to launch one.
Given the opportunity, industry leaders such as Wolfs Group have moved to capitalize on this market. The company recently acquired automation companies as part of its plan to install Bitcoin ATMs across Europe. Wolfs Group intends to further roll out a crypto-fiat gateway and multicurrency cards based on Ferpay, a platform that was earlier on acquired by the firm.
This advancement is a good pointer of what to expect in the future as more merchants move to accept Bitcoin and other cryptocurrencies. So far, big players that have piloted a crypto accepting avenue include coffee retailer, Starbucks.
Crypto Derivatives and Futures Trading
Just when we thought the complexity of financial markets peaked with Mortgage Backed Securities (MBS), crypto futures and derivatives are changing this perception. The past two years have been particularly fruitful for these crypto-pegged instruments as they launched in some of the world’s largest stock markets. This has however not eliminated their high risk given the underlying regulatory uncertainty and lack of depth in terms of liquidity.
Currently, Bakkt is the most popular BTC futures market. The platform has had its own fair share of ups and downs leaving time as the only reliable factor to ascertain the future. In addition, this market is set to be highly competitive going forward as more regulators consolidate on crypto oversight to allow integration with financial services and markets.
Apart from crypto-based financial instruments, the digital assets can now be used for leverage trading on some exchanges. Clearly, the crypto futures and derivatives market is a replica of FX trading functions with the only major differences being the latter’s deep liquidity and legal recognition. Based on this innovation, blockchain and crypto have proven the ability to replicate modern-day finance; this might translate to a smooth integration given the proper guidelines.
AI Crypto Trading Bots
With Artificial Intelligence, blockchain and crypto utility can be driven up through programmed bots. The $5 trillion daily FX market set pace for this technology as institutions moved to delegate trading robots. Now that crypto is on an uptrend, the same tech is being implemented in existing digital currency markets.
Basically, a combination of AI and crypto trading gives one an upper hand in execution. This is because the in-built AI code can take action in milliseconds while a human-executed trade takes much longer. The whole idea is to capitalize on narrow windows given the fluid nature of prices in most markets.
This integration not only marks a milestone for crypto and AI but also blockchain implementation in financial markets. It is therefore likely that innovations within this space might further interlink with financial ecosystems for value addition in services.
Stablecoins and CBDC’s
Last but not least are stablecoins and Central Backed digital currencies (CBDC). These emerged primarily to reduce the volatility associated with crypto coins while giving access to the cryptocurrency market. Projects within this space mostly involve asset or service tokenization whereby the digital currency is pegged to a more stable underlying like legal currencies or precious metals.
One notable project in this field is the Megafun token (MEGA), a sports-built digital asset meant to increase FIFA product sales in China. It will also facilitate a 3D world and game for football fans; this will be through its MEGA powered ecosystem. In order to maintain a stable outlook, Megafun token is pegged to the Euro.
Centrally Banked Currencies are also on the rise given the opportunities in blockchain and tokenization. China had signaled last year that they would roll out their own CBDC in a bid to counter a black swan if the U.S senate approves Libra. The development in this space is however still at the research stage as most financial authorities prepare to hedge against a crypto takeover.
Andrey Sergeenkov is a digital entrepreneur with more than 10 years of experience. Assisted in raising of 90 mln USD investments for more than 150 crypto projects. He believes that actual usefulness is the best PR for any project.