Binance and CoinGecko are the only crypto services to enter the financial services category, which is still dominated by giants like PayPal, Stripe and Alipay.
The financial sector generally comprises a large group of industries involved in various business activities related to banking, lending, insurance, investment and allocation of money and cash. But now the trend is changing. There is a growing dispute between the giants of the traditional industry and the up-and-coming and relatively new crypto services.
This is mainly due to the difference between the two categories.
Crypto: Decentralized Nature of Financial Services
What is crypto financial services like compared to traditional financial assets?
The first feature is transparency. Consider the private placement market, bond issuance, and equity. The transparency of where those assets sit is not readily available to the average person. How they can be found is fundamentally different than on the blockchain.
Assets on the blockchain, such as bitcoin and ethereum, have transparency as to how they move and which wallets are holding different types of investments. There is transparency in terms of where those assets are located in the wallet. This is a fundamentally different mode of operation.
The second is the settlement and clearing model between traditional finance, blockchain and digital assets. In traditional finance, outside of over-the-counter (OTC) assets, most important products are centrally cleared assets sitting at large financial institutions.
Has actual control of the final asset. Traditional financial institutions use IOUs; Promising institutions will issue assets if needed. Meanwhile, the former controls the leverage or lends it. For the latter, the digital asset space has the capability and technology, like ledger devices, to manage assets without physically holding them.
Crypto financial services have taken a significant hit given the rise in illegal activities and incidents like collapse of crypto institutions.
Cons of the (decentralised) system
The collapse of FTX dealt a major blow to the credibility of crypto exchanges, with investors speculating about the safety and security of their money, many of them relying on traditional payment services. Owners of other businesses have since sought to reassure investors that their platforms are not at risk of facing the same problems as FTX.
For customers, this highlights the issue of liquidity. Individual consumers have more confidence in accessing their funds from traditional payment services than from crypto services. Sam Bankman-Fried has made things tougher for crypto exchanges by posting his comment that many third-tier exchanges are “secretly insolvent”, risking investors of their funds being locked in fraudulent exchanges. Fear.
People are resorting to intermediate solutions hardware wallets, which also come with complications. They are less user-friendly than crypto exchange services, and few people can use them efficiently. Ultimately, the success of crypto exchanges depends on the risk appetite of the pool of investors, which has a high degree of risk associated with traditional payment services. Conversely, risk-averse people are more open to investing their money in crypto exchanges.
Given the fear, uncertainty and growing skepticism (FUD) towards crypto, well-known service providers have also dropped in their rankings compared to traditional giants. The dataset shared with BeInCrypto sheds some light on the narrative. This data comes from Cloudflare Radar, a free tool that lets anyone on the Internet see global trends and insights.
FTX dropped from number 7 most popular crypto service to number 21 in November 2022 after declaring bankruptcy. Binance, CoinGecko, and Coinbase continue to dominate the most popular cryptocurrency services in 2022.
As per the data shared:
“Binance and CoinGecko were the only crypto services to break into the financial services category, alongside industry giants like PayPal, Stripe, Chase and others.”
The overview of the ranking was as follows:
This shows that crypto entities offering services remain fragile in comparison to traditional financial giants. It will take months or maybe years for the crypto sector to move beyond the haunted past of 2022. Far from competing.
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