Global cryptocurrency adoption has skyrocketed over the past few years. The alternative asset class — which were first adopted by libertarians and tech developers in its early years — have since welcomed the participation of institutional investors, family offices and even sovereign wealth funds.
Blockchain data platform Chainalysis found that the global adoption of cryptocurrency surged 880% in 2021, hitting an all-time high in the second quarter of the year. Since then, adoption rate has fluctuated in tandem with price volatility, although it remains well above the pre-bull market 2019 levels.
Despite the negative headlines that have dampened trust and confidence in crypto in the past year, demand and interest continue to stay resilient. According to Bitstamp’s Crypto Pulse research, over 75% of retail and institutional investors polled worldwide believed that crypto will become mainstream in the next 10 years.
In Southeast Asia, home to countries with some of the highest crypto adoption rates in the world, such as Vietnam, the Philippines and Thailand, cryptocurrencies are used to generate income, preserve wealth and hedge against currency devaluation. In the Philippines, for example, play-to-earn games had become extremely popular, especially during the height of the Covid-19 pandemic. Vietnam, on the other hand, is an emerging crypto hub with plans to develop a blockchain infrastructure to aid its smart city transformation.
This indicates that there is a very strong demand for crypto services in the region, says Bitstamp’s APAC Head of Business Development James Kow.
“From the Crypto Pulse research, we found out that 35% of retail investors globally cited ‘not knowing which platform to trust’ as the main reason for not investing in crypto. As the needs of investors evolve, their requirements for crypto providers have also become more sophisticated and demanding.
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“Many retail investors continue to hold a high level of trust in incumbent, regulated financial institutions and hence they are waiting for these entities to provide them with the access to crypto. This is why I think it is important for the financial institutions to recognise the demand and try to serve the need,” Kow elaborates.
Additionally, there are real use cases that are truly beneficial for these users that financial institutions can provide better by integrating crypto. For instance, by enabling secure, seamless and instantaneous cross-border transactions, crypto is able to address the issue of slow, costly and inefficient payments, he further explains.
Leveraging white-label solutions
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That said, there are not a lot of financial institutions, especially in the APAC region, that have launched crypto services to their customers. This is not due to a lack of desire to be involved in the space, but rather, barriers such as restrictive regulations, lack of expertise and the absence of the right technologies to serve their clients.
“When it comes to regulations, for instance — in October last year, the Hong Kong government proposed allowing retail investors to trade in cryptocurrencies and crypto exchange-traded funds. This shift towards a more positive regulatory stance led to a clear expansion of traditional financial institutions entering the market.
“There is a direct correlation between clear, sensible regulations that protect consumers and the comfort for financial institutions to operate in the space,” Kow adds.
The cryptocurrency industry is a fast-evolving space — instead of building and launching their own crypto services from scratch, a growing number of companies are now opting to leverage white-label solutions to quickly enable them with the capabilities needed to serve their customers.
Enter Bitstamp-as-a-Service, a modular infrastructure service that allows financial institutions to deploy crypto services to their end customers without going through the lengthy process of building their own solutions. This saves them time and cost and keeps the company’s focus on its core businesses and serving their customers.
As it is modular, Bitstamp-as-a-Service allows financial institutions to design a solution tailored to its needs, says Kow. “We offer a wide spectrum of solutions for financial institutions. For those that already have their own platforms, they can easily supplement their existing offering with Bitstamp’s liquidity.
“On the other end of the spectrum, if the financial institution needs to have an entire infrastructure, we are able to provide them with the complete suite, which even includes providing compliance services. We understand that anti-money laundering and know-your-customer (AML/KYC) measures are important, so we make sure that they are able to build their crypto capabilities and meet their compliance and regulatory obligations,” he explains.
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Bitstamp stands out as the preferred provider of crypto white-label solution, given its status as the world’s longest-running crypto exchange. Equipped with deep order books and industry leading API connectivity, Bitstamp offers 99.97% uptime as well as human customer support.
Priding itself in being compliance-forward, Bitstamp is the first crypto service provider that was granted a licence to be regulated in the EU as a payment institution. Since 2019, the firm has also held the coveted BitLicense from the New York State Department of Financial Services. Bitstamp currently holds over 50 licences and registrations globally and is seeking more regulatory approvals.
“Given how we are regulated, we believe that it puts us in a better position compared to other service providers, aside from the fact that we understand financial institutions better and speak the same language.”
2022 has been a challenging year for the crypto industry. The collateral damage that followed in the wake of the collapse of several industry heavyweights have caused investors and regulators to put their guards up as trust continues to waver in the bear market.
That said, Kow highlights that the market is still resilient — Bitcoin is up 41% YTD while Ethereum is up 37% YTD. As a comparison, the S&P 500 is only up 4% YTD while the Dow Jones Industrial Average is down 1%.
Meanwhile, there is still continual adoption for cryptocurrencies from the utility point of view. This is as developers remain working on new applications in the decentralised finance space, as well as the increasing use of stablecoins at the retail, institutional and sovereign levels. With regulatory developments in place, institutional investors are poised to maintain their bullish positions on cryptocurrencies.
“Based on the findings of our Crypto Pulse research, globally, 10% of all retail investors hold crypto in their portfolios, while 60% of those who have crypto, trade crypto daily/weekly. This increased interest means that there’s no better time for financial institutions to start evaluating how they can build out their crypto offering,” Kow concludes.
To find out more about Bitstamp-as-a-Service, visit https://www.bitstamp.net/bitstamp-as-a-service/