Financial institutions and enterprises have shown significant and rising interest in cryptocurrency and blockchain technology. With proper regulations in place, Ripple, the crypto solutions company, believes that global financial institutions will continue to move forward with crypto adoption at a faster pace. Meanwhile, institutional interests in crypto are centered around portfolio management and payments.
Crypto Adoption by Financial Institutions
It might interest you to know that financial institutions are no longer sitting on the fence with crypto. In times past, the overwhelming narrative on crypto asserted that ‘it is only used for speculative purposes.’ Interestingly, the narratives have long changed as global financial institutions and enterprises now see a variety of reasons to embrace crypto and its underlying technology.
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As revealed in a survey by Ripple, three core rationales propel financial institutions to add cryptocurrency to their portfolio. The first is its widespread use for payments. Secondly, crypto provides a hedge against inflation or other asset classes or could serve as an alternative to bonds. Organizations also adopt crypto because of its use as a bridge currency.
“In the US alone, 2,300 organizations like PayPal, Microsoft, Whole Foods, and UNICEF have begun accepting cryptocurrency as a form of payment, and so of course these organizations need to manage cryptocurrency as support for payments (whether they hold it themselves, as some do, or custody through a third party). Some organizations are also now paying employees in crypto,” part of the report said
Furthermore, the 2022 investigation by Team Ripple reveals that in the next three years (2025), 76% of financial institutions around the globe expect to integrate cryptocurrency into their businesses, assuming government regulations permits. On the other hand, the majority of customers surveyed globally noted that they would buy crypto through their bank if the bank offered it.
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Also, the report centered on Crypto Trends in Business and Beyond, shows that 70% of global financial institutions and enterprises are interested in using blockchain for payments.
Additionally, more than 20% of global consumers said that they would only buy sustainable cryptocurrencies. Therefore, as institutions move forward with crypto adoption, it is hoped that they will prioritize sustainability as a factor in their decision-making.
From all indications, there is a universal interest and common agreement that cryptocurrency and blockchain technology will be the propeller of tremendous financial transformations that will bring about numerous benefits to everyone.
Some of these benefits for financial institutions include offering a more sustainable solution, lowering costs for customers, giving more people access to financial services, giving more people a better deal when using financial services, creating new revenue opportunities with current customers, and creating competitive advantage and the likes.
However, the three common barriers slowing crypto adoption by financial institutions and enterprises are unclear regulations, price volatility as well as issues of fraud and scams.
Related: Ripple’s CBDC Proposed Solution Adopted in the 2022 G20 TechSprint CBDC Challenge: Details
Are CBDCs the Future of Fiat?
With places like China and the Bahamas leading the way, Central Bank Digital Currencies are increasingly coming into the picture. It is believed that CBDCs can be issued to any citizen having internet access through a computer, or smartphone, thereby significantly bolstering financial inclusion.
Nonetheless, several factors like consumer education, network access, privacy, and security concerns must be considered before the implementation of CBDCs.
Per Ripple’s recent survey, 30% of respondents believe the impact of CBDCs on finance will be massive in the next five years. Meanwhile, an estimated 80% of central banks around the world are actively exploring the use of Central Bank Digital Currencies (CBDCs).
Currently, the 2022 G20 TechSprint CBDC Challenge is underway, spearheaded by the Bank for International Settlements (BIS) Innovation Hub and Bank Indonesia, under the Indonesian G20 Presidency. Notably, Ripple is the only top blockchain firm among the 21 finalists, as its proposed solution on CBDCs gained support from the committee.
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