In 2020, we saw Financial Institutions and legacy banks dive into the world of digital currency and blockchain technology. From banks utilizing blockchain Technology for settling payments at quicker speeds to banks developing Central Bank digital currencies to digital currency organizations turning out to be banks, we understood that digitization of business operations and blockchain is paving a path forward for various institutions, thereby becoming the next evolution of finance.
In this review, we will take a glance at some of the revolutionary developments in finance and banking and other such sectors that took place in 2020 involving digital currency and blockchain technology.
Digital currency service providers becoming National banks
In this year, we witnessed that a digital currency service provider turned out to become a National Bank initially when Kraken became the state Chartered Bank.
Such kinds of development enable digital currency service providers for operating anywhere within the United States without requiring to apply for licenses for operating in every individual state. Moreover, it also paves the path for financial products and outputs encircling throughout digital assets. As per Kraken, from receiving salaries and paying bills in Crypto to incorporating digital assets into trading portfolios and investments, the organization will enable their clients within the United States of America to bank seamlessly within National currencies and digital assets.
Followed by Kraken becoming a National Bank, a digital currency organization, Avanti additionally got a state Charter. In the first week of December, we witnessed BitPay and Paxos file with the office of the comptroller of the currency for becoming National Banks. On the other hand global cryptocurrency exchange PayBito recognized as India’s leading crypto exchange with the best INR compatibility.
Central Bank Digital Currencies
When it comes to Central Bank digital currency news, there has been a lot of buzz in 2020. Governments and Central banks globally have even been under a bit of competition for being the initial ones to launch a central bank digital currency. Various nations are presently developing and further launching a central bank digital currency including, Australia, Ghana, Turkey, Lebanon, Japan, France, United States, China, Lithuania, Bahamas, and Turkey.
Various Nations globally are working towards launching a central bank digital currency of their own, and people happen to be most interested in the central bank digital currencies that will emerge from the leading economies of the world, such as France, the United Kingdom, the United States, Japan, and China. With the Bahamas already launching their Central Bank digital currency in 2020, the world has its eye on the central bank digital currency developments of China.
Among the five significant economies mentioned, China happens to be the closest to launching its Central Bank digital currency and has received its Central Bank digital currency into the hands of millions of citizens concerning pilots in participating cities. Presently, more than 3,000 merchants are accepting the central bank digital currency of China.
Tokenized Stock Trading
Tokenized stocks provide the world with a glimpse at the upcoming revolution of the stock market. Although Financial Institutions and traditional banks are slow to transform, they can end up saving a significant amount of cash if their transactions happen over the blockchain. Moreover, it can also help them settle payments at a much quicker rate when it comes to blockchain transactions settling almost instantaneously. It leads the world to one of the most revolutionary developments involving blockchain technology in the year 2020.
The end of 2020 witnessed digital currency service providers launch products and outputs that work at the intersection of legacy finance and blockchain technology. It indicates that users can seamlessly trade shares of stocks that are connected to the value of the underlying stock over the blockchain. Moreover, it also facilitates users for redeeming the tokenized stocks concerning the underlying stock.
The Evolution of Fiat Currency, Finance, and Banking
Real-world assets tokenizing stocks, central Bank digital currencies, and utilizing blockchain Technology concerning the settlement of financial products and payments are all innovations that enterprises are looking forward to adopting. There remain robust possibilities that we will witness more digital currency service providers looking forward to filing for becoming National banks in the next year as well.
Similar to money evolving from a system of barter system to paper money, credit cards, electronic payments, and debit cards, the technology of blockchain and its products can be developed on top of them that might signify the next logical revolution of finance and banking. It is because they can significantly decrease transaction costs and settlement time while better aligning with digital lifestyles and enhancing the integrity of a system that various people live worldwide.
Banks Utilising Blockchain and Stablecoins for Settling Payments
Financial Institutions and legacy banks have started integrating blockchain Technology within their payment settlement layer. In 2020 the world witnessed several Institutions utilizing blockchain technology for payment and bond settlement, with JP Morgan and Chase being the notable instance of launching a new blockchain unit.
This unit entirely concentrates on utilizing blockchain technology along with the stable coin for settling Global payments. With the help of the blockchain settlement system, banks can participate within the blockchain network pilot and get their payment settlement in minutes other than days, thereby helping the organization to save approximately 75% of the entire cost in the procedure.
Development of Private Enterprise Blockchain
Private blockchain happens to be a more convenient form of the database concerning any large commercial organization because they combine all advantages of blockchain Technology but do not need to share all sensitive commercial data with people. Rather, it provides options to give permissions and choose who can see it.
In 2020, we have witnessed the development of blockchain in the supply process of various companies. IBM happens to be one of the leaders in this sphere with its hyperledger solution. As per reports, the company has already integrated hyperledger into their business processes of more than 1000 organizations.
Stablecoins and lending have driven the development of decentralized finance. Approximately, there are over 1 billion dollars in assets on decentralized finance platforms, up from 300 million dollars in January 2019. Moreover, 60% of assets remain on the maker platform, which is a stablecoin project United with Crypto.
Blockchain Technology on Post Quantum Era
When it comes to quantum computing and blockchain, blockchain works on the concept of connected nodes that communicate with each other for making important decisions. The lack of a centralized entity opens up various possibilities.
To make sure that blockchain technology remains safe and secure, various protocols are incorporated. The consensus algorithm is one among them that makes sure that the entire network remains counterfeit resistant. The present generation concerning the blockchain network remains capable of defending the 51% attack. However, when Quantum computing comes in, it might fail most of the time.
Overall, the year 2021 is likely to be more interesting than in 2020. The bear trend on the cryptocurrency market will end, thereby igniting the interest of a large audience again. This will lead to bringing more adoption to blockchain technology, which presently is a lot more mature than it was in 2017. If the pandemic crisis does not crash all markets, the upcoming year is going to be very exciting. The leading platforms at the beginning of 2021 will be those that can provide a unique combination of features to players and consortia building enterprise-level solutions.