Will crypto replace or complement the existing financial system?


A review of our panel discussion organised in partnership with trade association CryptoUK and law firm Paul Hastings.

14 September 2022

Citigate Dewe Rogerson hosted a fascinating panel discussion on whether crypto will replace or complement the existing financial system. Our thanks go to the moderator, Jack Denton of Barron’s and MarketWatch, and panellists Keld van Schreven of KR1 plc, James Butterfill of CoinShares and Marcus Sotiriou of GlobalBlock. This year will certainly go down in history as an interesting one for both the crypto and wider financial system, which is why the topic of discussion was all the more pertinent given the recent decline in digital asset prices and technology valuations.

The general theme that won through was how far blockchain and digital assets have developed in the last few years, with many more real-life use cases adopting blockchain and crypto technology, such as the ‘play-to-earn’ games, which are particularly popular in Asia at the moment, decentralised finance (a.k.a. DeFi), NFTs and the establishment of both asset-backed and algorithmic stablecoins.

Marcus Sotiriou spoke about how DeFi has been one of the most fast moving and innovative areas within digital assets with decentralised insurance being seen as a real-world use case. Most notably, a blockchain called Chainlink is providing data through a weather oracle that enables farmers to gain access to crop insurance and protect themselves against periods of droughts.

One attendee asked a question that is familiar amongst both proponents and sceptics of digital assets alike, on “what is the killer app for blockchain technology and the evidence of this playing out?” This was answered very neatly by James Butterfill, who supported his response with robust evidence, explaining how one example is the use of blockchain and crypto technology providing new, fast, and cheap payment rails. This is especially evident in many emerging economies, where people who cannot obtain bank accounts (the so-called ‘unbanked’), are now able to remit monetary value anywhere in the world using blockchain and crypto technology, and how in Nigeria, the volume of remittances made across crypto rails has increased significantly. Research by PYMNTS and bitpay, highlighted that 85% of businesses with an annual income of over $1 billion are adopting crypto payments to obtain new customers*.

However, to maintain the continual adoption of blockchain and crypto technology, one needs to ensure the correct regulatory framework is in place. The panel was unanimous in agreeing that regulation needs to be proportionate so as not to stifle innovation, and it should be designed to protect consumers appropriately. Nevertheless, currently regulators are behind the curve, they are playing catch up and in effect this is causing a great deal of uncertainty. The overriding concern is that if regulation goes too far, then it could be to the detriment of both consumers and the countries adopting the use of blockchain technology.

Lastly, it is worth mentioning that blockchain technology does face its challenges, one being its ‘trilemma’ which is the trade-off between decentralisation, scalability, and security. This is a topic that warrants its own panel discussion, so without going into depth here, it is a trade-off that will impact not only the adoption of crypto, but how it is also regulated.

It was an overwhelmingly positive discussion and, in the end, I think that we can conclude the view is that crypto will in time complement the existing financial system.

* https://www.nasdaq.com/articles/report-says-85-of-businesses-adopting-crypto-payments