It’s a time of reflection and anticipation at The Fintech Times throughout December, as we look back at developments and trends over the last 12 months and forward to the year ahead.
We’re excited to share the thoughts of fintech CEOs and industry leaders from across the globe to 2023’s key takeaways and what we should expect to be top of the agenda in 2024.
Today we hear from AssetPass, XEROF, Banxa and Deus X Capital on the growing importance of cryptocurrencies in wealth management, stablecoin adoption, global regulatory expansion and the need for strong compliance measures.
They outline how traditional financial institutions are cautiously embracing crypto while institutional adoption and regulatory changes gain momentum, all underlining the critical role of risk management and compliance in the digital asset space.
Surge and challenges
For Paul Rossini, co-founder and CEO at digital asset platform AssetPass, while the conversation around the cryptocurrency market in 2023 has been shrouded by the news of FTX, financial advisors and wealth managers cannot overlook the growing importance of digital assets in their clients’ portfolios.
“The price of Bitcoin has surged by over 100 per cent since the start of 2023 and the tokenisation of real-world assets has exploded exponentially; hence many high net worth individuals (HNWI) are diversifying their wealth into these asset classes,” says Rossini. “However, what they and many of their financial advisors are unaware of and have overlooked is the perfect storm approaching.
“Significant sums are being invested without due consideration to the digital legacy succession process and it’s a fact HNWIs are getting older. As a result, some beneficiaries of digital wealth face being locked out of their inheritance because secure processes were not put in place to enable the transfer of these digital assets. This is also the case for corporate digital succession.
“Family businesses have for years relied on traditional paper-based methods for succession, which do not work in today’s digital landscape, and a digital solution is key to the continuation and survival of these long-running businesses.
“These new asset classes, together with new digital IDs and wallets, will undoubtedly play a more prominent role in wealth management in 2024, so it’s essential that financial advisors take the time to understand this relatively new but critical issue and put the steps in place to ensure they and their clients don’t get caught in the storm.”
Adapting to fintech evolution
Marc Taverner, CEO and co-founder of XEROF, a Swiss financial services provider specialising in cryptoassets, says it is crucial to be ready to evolve in order to stay competitive.
“In the past 12 months, one of the key lessons I have learned is that the fintech industry is evolving at an unprecedented pace,” he says. “To succeed in this dynamic landscape, it is crucial to be adaptable and embrace change. The ability to pivot quickly and capitalise on emerging trends has become essential for staying competitive.
“Additionally, stablecoins and regulations have gained significant traction in regions like China. I predict that this trend will continue to expand globally in 2024, with more countries adopting these solutions.
“Looking ahead, I foresee continued emphasis on innovation driven by advancements in artificial intelligence and blockchain technology. We have already witnessed a significant increase in the number of people investing in and buying crypto in my company, XEROF, and I expect this trend to continue in 2024.
“Furthermore, with the growing focus on sustainability, I anticipate a greater integration of fintech solutions to support environmentally conscious practices within the industry. Blockchain technology can be leveraged for supply chain transparency, while digital payments can reduce paper usage. Additionally, fintech solutions can play a vital role in tracking carbon footprints, helping companies and individuals make more sustainable financial decisions.
Navigating the crypto landscape
While the crypto market and broader fintech space have experienced a challenging year, 2023 is ending on a genuine sentiment of optimism, according to Holger Arians, CEO at crypto-to-fiat on and off-ramp Banxa. He sees traditional financial institutions embracing crypto cautiously and stresses the need for strong compliance measures.
“Across the board, a diverse array of players are still building and driving innovation forward and are now primed for what seems to be the inevitable return of an up-trending market,” said Arians.
“In 2024, we’ll see greater interest from traditional financial institutions embracing crypto, fully recognising the massive potential of blockchain technology for real-world payments use cases. Yet, with this increased interest comes heightened regulatory scrutiny, as authorities closely watch over cryptocurrency applications and transactions.
“This regulatory attention emphasises the imperative for companies in the crypto sector to adopt a vigilant stance, implementing strong compliance measures to navigate the ever-changing regulatory environment adeptly. Achieving a careful equilibrium between innovation and adherence to regulatory standards will prove pivotal for the sustainable advancement and seamless integration of crypto and blockchain technologies into the broader financial landscape.”
Digital assets: a cautionary tale
Tim Grant, CEO at recently launched digital assets focused investment and operating company Deus X Capital, anticipates institutional adoption and regulatory changes, with a focus on risk management and expanding crypto regulation.
“2023, and by extension 2022, will likely be viewed as a valuable cautionary tale for digital assets,” says Grant. “FTX and Binance are now in the rearview mirror and have marked a watershed moment as digital assets become a regulated and institutional fixture in global capital markets. Retrospectively, we can harvest the core lesson that sophisticated risk management, a very established and mature discipline that has been lacking in this space, is a non-negotiable pillar of all financial institutions regardless of the asset classes they trade.
“In 2024, the institutional adoption cycle is set to gain momentum, driven by a combination of increasingly distorted crypto asset valuations compared to other asset classes, and a positive macro environment. There will be notable regulatory developments across global jurisdictions, with the US ETF narrative acting as a catalyst.
“We can expect this to spur additional investment in next-generation infrastructure and fintech, fostering the institutionalisation and growth of markets, but it seems increasingly likely that regulatory frameworks will extend beyond just ETFs. Look out for the scope of crypto regulation to include derivatives and structured products, opening up the possibility of these as primary mechanisms for trillions of dollars of managed wealth to access exposure to crypto and digital assets.”