Why are financial firms turning to crypto?- iWONDER

  30 September 2019    Read: 9610
   Why are financial firms turning to crypto?-  iWONDER

A wave of crypto startups has washed upon the shores of the financial industry in the last couple of years. The industry leaders, aka banks and exchanges, have seemed invincible up until now.

Nowadays, there are dozens of crypto startups racing to take over the stage. With the existing global financial system contributing to numerous inequalities, these startups have recognized the need for a better financial solution.

Seeing that blockchain technologies are a good fit for this sector, numerous companies have focused on developing blockchain-based platforms and products. The aim behind turning to crypto is to make financial services more accessible on a global scale.

Further in here I’m going to tackle the issues posed by the traditional financial system. While doing so, we will look into crypto and decentralized finance as a potential solution.

Traditional vs. Decentralized Finance

The current global financial system has proved to be inefficient in multiple aspects. With so many financial intermediaries present in the system, the users face countless security risks. According to CIODIVE, cyber criminals target financial services 300 times more than other sectors. PWC analysts claim that 45% of financial intermediaries such as money transfers and stock exchanges suffer from serious cyber crimes every year.

The growing number of cyber attacks leaves the public at risk of financial loss and data exploitation. The existing financial system deprives millions of people from basic financial services because of barriers such as location, wealth, and status.

A decentralized financial system based on a public blockchain would provide access to financial services to everyone, regardless of their location and status. Numerous startups and companies have recognized the potential of open source networks to change and decentralize economic activity. Networks such as Bitcoin and Ethereum could solve the issues of the traditional financial system because of their permissionless nature. Blockchain could replace the current financial system because it is permissionless, decentralized and transparent.

Here’s what all of this means:

  • Blockchain is permissionless, which means that anyone in the world can connect to it. This kind of accessibility on a global level would solve the issue of inequality posed by the current centralized financial system.
  • Blockchain is decentralized. This means that its records are kept scattered across thousands of devices. There is no centralized server or body of authority that controls the blockchain.
  • Lastly, blockchain is completely transparent, since all transaction records are publicly auditable.

One of the examples of traditional financial companies that turns its face to crypto field is Rainer AG, an independent asset management firm based in Switzerland. Having been present in the traditional financial sector for over 30 years, the company has recognized the need for a shift toward new technologies.

With the primary mission to ensure security and transparency for token issuers and holders, Rainer AG has introduced a set of offers including: an international STO exchange platform, a crypto trading platform and a European electronic financial service for operating crypto and fiat currencies through a single account. And they’re planning on collaborating with top companies to provide an ecosystem that will include innovative technological products aimed at the global financial market.

With more and more companies in the financial sector adopting innovative technology, crypto and blockchain solutions are on the path to revolutionize the financial system.

The adoption of blockchain technology and the spread of crypto-based financial services would shape a new world of decentralized finance. This world would be characterized by wider global accessibility to financial services, safer transactions, and lower transaction costs.

 

Forbes


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