The Financial Revolution: Which Will Dominate? Crypto, Fiat, or Hybrid?

In the midst of a rapidly evolving financial landscape, the question arises: which form of currency will prevail - fiat, digital, or a hybrid model? This blog explores the potential benefits and drawbacks of each system to create a more flexible and adaptable financial future.

The Financial Revolution: Which Will Dominate? Crypto, Fiat, or Hybrid?
Photo by Ishan @seefromthesky / Unsplash

The journey of money has seen multiple stops :
Goods. Stone. Metal. Paper. Code. and now public blockchain!

Cryptocurrencies have been around for a while now, and they have begun to gain popularity among investors. However, what is not so clear is what the future of finance looks like.

Cryptocurrencies are a new way of doing things. They have certain advantages over the traditional currencies we use today, and that's why they're becoming so popular.

Cryptocurrencies aren't controlled by governments or central banks, which means they're decentralised. In other words, there's no one person or organisation in charge; instead, cryptocurrencies are managed by thousands of people around the world who contribute their computing power to keep it running smoothly and securely (and thereby earning rewards).

The current financial system is often a time-consuming process (read-processing times, intra-country transfers, remittances, holidays) and also inaccessible to a large segment of the population. Cryptocurrency shrinks geographical boundaries, enables true, real-time global trade and finance expands global reach.

Crypto-assets are potentially changing the international monetary and financial system in profound ways             - IMF blog Dec 2021

Major bank, JP Morgan uses a permissioned stablecoin to facilitate settlements with their institutional clients. Coffee giant Starbucks accepts Bitcoin as a mode of payment in El Salvador. Similarly, the luxury fashion brand Gucci accepts a wide range of cryptocurrencies as payment in the US.

Crypto adoption is on the rise. Institutions as well as retail users are starting to use cryptocurrencies for their day-to-day activities. Nations like Hong Kong and Dubai are attracting major cryptocurrency businesses with their pro-crypto regulations.

However, we believe that the Fiat currency too is here for the foreseeable future. The current systems and currencies have evolved over centuries. Traditional banking has stood the test of time and while not perfect it has displayed resilience after all the world runs on it, it is universally accepted and has strong support infrastructure developed around it.

Despite the growing popularity and increasing TVL (total value locked) in the cryptocurrency market, it is crucial to note that this is still an emerging segment. The majority of countries are still trying to work through the most appropriate ways for them to regulate this industry. And some of the negative elements are misusing lack of information and clarity to con unaware consumers.

Like any other industry, as the market matures and stabilises so will the crimes and thefts in the cryptocurrency market. We expect the future will see flushing out of the scams and fakes and the ones with strong foundations to survive. And as the adoption grows stronger, the infrastructure around cryptocurrencies will grow too.

While the future of finance is still being written, it’s clear that cryptocurrencies and fiat currencies will play an important role in its evolution. We expect to see more institutions offering cryptocurrency trading as well as more consumers using payment apps to manage their finances. Meanwhile, more people are also turning to crypto for payments and even investments. The proliferation of blockchain technology means that traditional financial institutions will need new ways to stay competitive with these new players who don't always operate under the same rules or regulations as them - but at least now we know what those might look like!

The takeaway here is that we are standing at the confluence and the future of finance will likely use both traditional currencies and cryptocurrencies!