Skepticism around Bitcoin and other cryptocurrencies is slowly wearing off as companies become interested in their benefits. Digital assets on the blockchain could provide businesses with the transparency, security, and inflation protection they need at the cost of maintaining the networks and contributing to decentralization. Therefore, considering the challenging times the world is going through, the increasing user interest is drawing companies in.
But how could centralized institutions control and work with cryptocurrencies? Ideally, digital assets are leveraged on public ledgers, where users can transact them however they like. Still, cryptocurrencies are not yet regulated, which may impede people’s access to them. That’s why centralized exchanges and similar companies are making it easy for people to buy Bitcoin with credit card, building the bridge between two worlds and contributing to pushing for adoption.
At the same time, adopting cryptocurrencies and using them in a different ecosystem comes with several challenges. In the end, it’s all worth it, but how can businesses do this?
The start of experimenting with Bitcoin
More financial institutions are considering Bitcoin a lucrative alternative to their usual products and services. For instance, Bitcoin-backed lending would benefit the user from low interest rates, which could also increase the number of people who lend cryptocurrency. This comes just in time since fiat interest rates are making it difficult for people to get by.
Interest in Bitcoin financial products has slowly taken over since the beginning of the year, when the SEC (Securities Exchange Commission) approved Bitcoin exchange-traded funds, triggering a massive number of institutional investors to these assets. After reaping the benefits, some found the use of cryptocurrencies within their services promising, so they started experimenting.
What does Bitcoin-backed lending look like?
Financial institutions that have already started lending with Bitcoin stated that interest rates can go from 11% to more than 13% depending on the type of loan. This allows them to make Bitcoin as collateral, so borrowers will use it for damages. At the same time, lenders benefit from superior annual percentage returns (APR) compared to regular lending services.
What’s best about these services is that they receive regulations one by one, so they’re acknowledged on the market and are sure to protect users. Financial regulators seize the opportunity for these digital assets and offer licenses if companies adequately file for them and keep up with regulations.
Does this mean Bitcoin adoption is getting closer?
Since centralized financial institutions tap into the decentralized world, this might be great news for crypto enthusiasts since it means more companies will have to follow the trend and expand their services for the upcoming customer audience.
Although the beginning of cryptocurrency was slow and difficult, we’ve already seen some examples of how different countries have adopted these digital assets. El Salvador made Bitcoin legal tender in 2021, with companies accepting transactions in the currency and users benefitting from a lack of capital gains taxes.
In addition, to prepare citizens for using Bitcoin, especially those without access to banking, the government created a special educational project in which prepared teachers help students of all ages understand what Bitcoin is. Therefore, implementation did not have to occur until the country totally emerged in the subject; instead, it came in time.
The world needs to be aware of Bitcoin and cryptocurrencies
The thing about Bitcoin and other digital assets is that while many people don’t know about them, there are plenty of users worldwide with digital wallets and investment portfolios. Since blockchains are decentralized, it might be more difficult to gather data on how many crypto users every country has. It’s also challenging to understand people’s needs and level of understanding of the whole situation.
Still, crypto enthusiasts would argue that the lack of education is leading to this slow adoption because the benefits of cryptocurrency would counteract the challenges and flaws of our system. With cryptocurrency, anyone can access it and start investing to create a portfolio and slowly make constant income. At the same time, investing in diverse companies and projects could help boost the economy.
Educational projects, community meetings, and social media posts are getting more intense as the learning curve steepens. In Argentina, for example, the government includes cryptocurrency lessons in the curriculum, and students will also be able to learn Ethereum’s programming language, Solidity.
Still, cryptocurrency can be risky
The only way in which Bitcoin and other cryptocurrencies could be used and implemented into our systems would be for us and developers to mitigate the risks they come with. For example, we already know that crypto is volatile, but what are some ways in which users would prepare for these moments? Technologies like artificial intelligence are used now in analyzing the market, along with machine learning, so users can benefit from the final product without spending too much time manually checking the market.
At the same time, the lack of regulation is a problem that needs to be settled in the future. We’re far behind in regulating crypto markets, even though they’re so present in our real world. Few governments or countries are taking the steps necessary to introduce cryptocurrencies in the financial world, so we’ll have to wait until more follow El Salvador.
Finally, blockchain technology, which plays an important role in cryptocurrency, is constantly changing and adapting. Therefore, we need more talented people who can keep these networks safe and navigate congestion. Still, there’s so much information to master and skills to learn that this might become a real challenge in the future.
What do you think about banks using Bitcoin?
As Bitcoin becomes more popular among centralized ecosystems, financial facilities are experimenting with the asset as a potential integration for borrowing and lending processes. Banks, for example, are interested in what Bitcoin can bring to the market, considering how many people are increasingly leveraging the coin’s benefits. Bitcoin can offer seamless, decentralized, and transparent transactions with low costs, helping worldwide users better exchange currencies and contribute to the economy.
