Crypto’s role in finance is growing, but the technology is still new, and there are hurdles to clear. That was a key takeaway in a discussion between four crypto and blockchain leaders at the Global Financial Leadership Conference.
Pointing out that Apple has more cash on its balance sheet than the entire crypto industry has in market cap, BitMEX founder Arthur Hayes says crypto has not yet reached asset class status unto itself.
“Could it become a bona fide asset class in the next ten years? Maybe. The jury’s still out on whether or not Bitcoin is actually secure over the long run. It’s been a decade, which is pretty good, but it’s still an experiment. But it’s looking like it could be a new way of raising capital sending value around the world.”
Reddit co-founder Alexis Ohanian, who now runs an early-stage venture fund, said he applies crypto to his investment portfolio, but that there’s still plenty of risk.
“As an asset class, I aim for about 10 percent of my net worth in crypto, and my bet simply being if this future that we hope for technologically pans out, this will be a really material investment, but it’s still tremendously risky.”
Finance Gets Into Crypto
Several established exchanges and financial firms have launched crypto products, including Fidelity’s recent announcement of a crypto trading platform. Panelists, which included Dan O’Prey of Digital Asset, says these products are well-thought out despite many of them coming online during a bear market for major crypto assets like Bitcoin.
“They’re probably looking at the long-term trend here. This isn’t just a ‘What’s the price today, and what’s the interest,” says O’Prey. “They’re building out the infrastructure to enable access that their customers want to see.”
Each of the panelists agreed that the applications of crypto and, more broadly, blockchain to the financial system will have a real impact on some existing systems.
“The real projects, such as the one that the ASX (Australian Stock Exchange) has, they’re literally replacing their entire post-trade system for equities with a distributed ledger with a Digital Asset platform. As the hype dissipates, people will focus more on what’s real, what business problems can we actually solve.”
There’s also reason for confidence for crypto adapting to the financial industry because of who is building the technology. Many of the key startup founders in the space have found previous success in technology, and many come from the financial world, says Ohanian.
“The real interesting infrastructure solutions that are being built now for the enterprise are usually coming from founders who have spent time in finance, who already have the relationships there. Who were tapping into their r/bitcoin subreddit during work hours with their wheels spinning trying to figure out a way to do their job better, cheaper, faster.
Moderator Laura Shin asked if the decentralized legacy of cryptos might find friction with adapting to the largely centralized world of finance.
“What I think has always been true in technology, is users will gravitate towards the better user experience,” says Ohanian. “I think what we’re going to see in the next 10 years is going to look a lot more like traditional finance just done better, cheaper, faster than the Utopian crypto future.”
“I think with decentralization, people often get caught up with thinking that’s the goal,” added O’Prey. “Censorship-resistant cash was the goal, and decentralization was a requirement in order to achieve that goal.”