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Financial world will never be the same again

30 May 2018 21:00, UTC
Margareth Nail
ICO, as the product of crypto economics, created a furor in the financial market last year. The amounts of funding raised by projects through the deployment of tokens were twice those of raised through venture financing. Moreover, the market saw the blockchain-based projects, which promise to perform the functions of banks, insurance and other financial companies — and these appear to be faster and much more qualitative. Some experts see this as a threat to traditional finances, and the boldest of them predict death to the existing system. Bitnewstoday together with experts, decided to discuss whether the financial world should be worried about the emerging crypto economy and enact measures to protect, or maybe it's worth trying to make friends with it?

The scare stories

Experts inspired by the possibilities of crypto economics, portend bleak future for banks and other financial companies.

"It seems to me that not all the participants of the financial market are aware of the scale of the coming transformations. Cryptocurrency and blockchain are based on breakthrough technology, which will certainly have a significant impact on industries with large amounts of involved data. Insurance, real estate and, of course, fintech, will be the first to introduce innovative solutions. Other sectors are already considering this technology," says Alexander Novozhenov, the head of Sibcoin Foundation.

The representative of the crypto community also points out that cryptocurrencies pose a threat to banks, as they are (cryptocurrencies) an instrument that excludes the need for an intermediary. In addition, many people prefer investments in Bitcoin to a bank deposit, and, according to the expert, it is an excellent value preservation tool.

However, if you look at the fluctuations in the value of Bitcoin, it becomes clear that such investments can both make you incredibly wealthy and bankrupt.

Some crypto enthusiasts believe that the crypto community will catch the traditional financial sector unaware as it is not ready for such changes.

"Today, traditional financial institutions are not ready for a new kind of assets because of their great inertia. Until now, many believe that this is “a bubble”, although many countries have already legalized cryptocurrencies", comments Tachat Igityan, the co-founder of the DeStream fintech project.

Clem Chambers, CEO of ADVFN and Online Blockchain plc., believes that crypto technologies will not be able to eliminate intermediaries in the financial world. “There will always be intermediaries but their cut of the pie shrinks. There will be a scramble to grab some of the new pie, and often the government becomes the ultimate intermediary who appropriates the efficiency”,  the expert points out.

It'll be over

Anton Arnautov, CEO of Fintech Lab, is more skeptical about the chances of the cryptosphere to "kill" the traditional financial sector. The expert believes that it is premature to talk about how this tool can influence the banking sector because there is no established regulation of the ICO yet. There is too much scam is in this area, and therefore we can hardly expect imminent threats to the financial industry.

ICO attracted about $ 4 billion in 2017, and the most "promoted" (but not the most promising) projects have raised tens and hundreds of millions. The marketing budget for ICO is usually about 300-500 thousand dollars. At the same time, it appeared to be more important to persuade people to invest their funds at this stage of ICO development (which is often compared with the Wild West), than present a real vital project. "This phase will pass soon, and the regulation of ICO (as, for example, in the US), even its temporary ban somewhere (China, South Korea) and simply the establishment and stabilization of this market should sooner or later lead to reasonable volumes and investments. In any case,  ICO, as well as any other methods of crowdfunding, is a very promising avenue", said Andrey Povarov, an Associate Professor at the Institute of Business and Business Administration of the Russian Academy of Science and Technology.

Bankers should be on familiar terms with digital to survive

Financiers make an essential contribution to the stable growth of the world's economy. The integration of innovations into common processes is impossible without strengthening the professionalism of representatives of the financial sphere. Maggie McGee, director of research at ACCA, calls for particular attention to the study of digital tools, as well as the development of ethics and professional skepticism. "It is important to follow the digital revolution and participate in it right now to bring expertise in risk management and compliance with the legislation," the expert said.

According to crypto-anarchists, blockchain is like "a wooden stake" created to kill traditional financial companies. But on the contrary, it may become  "a saving pill" for the latter.

As experts say, the blockchain allows to reduce the time of operations significantly, especially where participation of many parties and paper-based workflow has been required before. It applies to finance trading and letters of credit. But this possibility of using blockchain in bank sector is not limited. Distributed data ledgers will allow you to store information about bails, property rights, and all transactions that customers conduct at the interbank level. As a result, blockchain will enable banks to optimize their business, cut costs and become more competitive.

To summarize, we can say that traditional finances have enormous power and will not allow crypto projects infringe upon their interests at the moment. However, those banks that do not want to recognize the importance of digital technologies may lose. But crypto projects also have the right to live. Most likely, the most successful of them will be repurchased by large traditional financial companies in the future.