If you ask crypto insiders, many of the bad investment decisions inexperienced cryptocurrency buyers make can be attributed to two different types of fear.
One is FOMO — fear of missing out — which leads people to buy high, after a rally is well underway. The other is FUD — fear, uncertainty and doubt — which is why overcautious investors opt to not buy (or, worse, to sell) when prices are low.
That’s a pretty fair explanation for why banks and other traditional financial institutions (FI) are so far behind their corporate customers in adopting cryptocurrency and blockchain technology, according to “Cryptocurrency, Blockchain and Global Business,” a recent study by PYMNTS and stablecoin issuer Circle.
What’s more, the bankers know it. A whopping 93% of the 250 FI executives surveyed said they believed customers would use cryptocurrencies, both as an investment and as a means of making transactions better, faster and cheaper. That’s a pretty safe bet: 56% of their multinational customers already use blockchain technology, and 58% use at least one type of cryptocurrency — 50% of them for cross-border payments.
Size is a big factor: Just 33% of companies operating in two markets use crypto, while a surprising 84% of those operating in at least 10 countries do so. Smart contracts (42%) and cross-border payments (37%) are the most common uses.
Looking at all multinational companies, 31% use bitcoin, 29% use a stablecoin like Circle’s USD Coin and 24% use ether. That last group is likely to include a fair number of decentralized finance adopters, as the vast majority of DeFi DApps run on the Ethereum blockchain.
And yet, despite the fact that 93% believe customers wanted crypto and blockchain services, only 10% of the FI executives said their firms currently support cryptocurrencies. That’s so wide a disparity that it suggests the financial and corporate executives view the utility of blockchain and cryptocurrencies differently — a disconnect suggesting that FIs’ strategies are misaligned with the needs of their customers.
However, nearly three-quarters of the FIs said they would introduce or expand access to cryptocurrencies (72%) or the blockchain technology on which crypto is built (73%) — and fully 61% said doing so was either “very” or “extremely” important.
Talk Is Cheap
That’s all well and good, except that the financial executives — particularly those at multinational firms — aren’t particularly confident in their understanding of crypto, DeFi and blockchain, or how it can be used. That’s despite 95% having staff focused solely on these technologies.
Looking at the whole sample of FI executives, 64% said they understand crypto and blockchain only “moderately well” or worse. This is one area, unfortunately, in which FIs and corporate clients are well aligned: The same 64% of corporate decision-makers said the same thing.
However, another question suggested that FIs aren’t very clear on what kinds of services their clients actually want. Asked about the most important drivers of their very widespread plans to offer cryptocurrency and blockchain services in 2022, financial executives divided their focus among 10 different factors that each received 20% or more — and they did so very evenly. The highest vote-getter — the strength or weakness of their internal infrastructure — got a mere 25.6%.
Asked which was the single most important, the highest vote-getter — the potential for greater operational efficiencies — topped out at a whopping 10.8%, and was the only answer to reach double digits.
There are some reasons for this uncertainty. Federal regulators have been back-and-forth about their support for allowing banks to use stablecoins, with the previous Comptroller of the Currency saying yes, and then his successor studying the issue before coming to an unsettling yes, but adding that you’d better clear your plans with us first.
Of course, corporations have the same concerns on a broader playing field, with 43% of multinational businesses citing regulatory issues as a barrier to adopting blockchain services — well above FIs’ 25%.
Looking at eight barriers to the adoption of cryptocurrency and blockchain technology that are common to FIs and corporations, corporations were substantially more concerned about seven than banks were.
Fully one-quarter of financial executives were unsure about buy-in from their leaders, while just 14% of corporate executives said the same — which suggests that FIs have a fair bit of work to do if they’re going to succeed at bringing crypto and blockchain services to their customers next year.
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