Cryptocurrency is enjoying a renaissance. Bitcoin was valued above $50000 and currently occupies what would have once been an outsize place in conversations about the future of finance. As the finance industry grows more receptive to cryptocurrency, new possibilities are opened for crypto loan platforms and other opportunities for the blockchain-based digitalization of currency. Perhaps most importantly, this paradigm shift predicts good news for businesses seeking to secure working capital financing with cryptocurrency collateral.
Global Powers Race to Develop Digital Currency
The digitalization of currency is a near certainty, with countries around the world striving to make theirs the first in wide circulation. The digital yuan is currently circulating alongside traditional coins and paper money in China, where digital payments spread rapidly. The EU and the U.S. are equally engaged in this race, with the former predicting a digital euro within four years and the latter at the forefront of innovation and implementing financial blockchain technology.
The rush to develop digital currencies stems from the growing legitimacy of cryptocurrency in the finance sector. However, the reverse is true, as rising interest in bitcoin underlines the importance of leading in official digital currencies.
Buy-In from Central Banks Underlines Growing Importance
As these nations seek to be first in digital currency, their central banks also explore the crypto space. According to a recent working paper from the Bank for International Settlements, 80% of central banks are developing their own digital currencies. These central bank digital currencies (CBDCs) have the potential to not only revolutionize the very concept of money but also set off similar waves of innovation in other industries.
While implementing these currencies may be years away, their development highlights the existing potential for cryptocurrency as an economic disruptor. A turn to blockchain-based currencies may simplify many aspects of finance, from international payments to the growing acceptance of cryptocurrency collateral.
Risk of Missing Out Eclipses Fears Over Losses
Interest in bitcoin as part of a comprehensive investment strategy is nothing new. However, what is new is the growing willingness of financial advisors to make crypto part of their clients’ strategies. According to the Bitwise/ETF Trends 2021 Benchmark Survey Of Financial Advisor Attitudes Toward Cryptoassets, just under 10% of financial advisors surveyed have allocated cryptocurrencies in their clients’ portfolios. Nearly another 20% reveal they will begin doing so next year.
What’s behind this increasing interest? Financial advisors are tuned in to the growing prominence of cryptocurrency and consider it wiser to risk losses than miss out. As worries grow in the financial sector over unbridled inflation and ballooning national debt, taking a chance on Bitcoin offers new opportunities for diversification and an entry to the full potential of digital currencies fueled by blockchain technology. By overlooking these opportunities, advisors face reputational damage and risk falling behind the curve.
Wall Street and Corporate Buy-In Speeds Legitimacy
Wall Street’s top financial firms are ready to explore the crypto space. From Goldman Sachs to JPMorgan, these organizations are slowly but surely increasing investment in cryptocurrency and devoting more resources and talent to digital assets. If this trend continues, it will fuel public trust and, accordingly, the value of cryptocurrencies. Likewise, banks have begun to view crypto more favorably, going so far as to consider cryptocurrency collateral a viable alternative to physical assets in some situations.
Corporate leaders are taking note as well, with PayPal allowing users to pay for purchases with cryptocurrencies and Venmo opening their platform for bitcoin buying and selling. This trend extends from corporate giants, including AT&T and Microsoft, to small and medium-sized businesses, of which 36% accept some form of cryptocurrency.
A New Approach to Financial Markets
While acceptance of cryptocurrency has been a slow process, the same isn’t true for the finance sector as a whole. For firms on the cutting-edge of the industry, the rise of crypto loan platforms has created a promising capital financing alternative for small and medium-sized businesses that are unable to take advantage of more exclusive securities-based lending. At the same time, the recognition of cryptocurrencies as legitimate assets makes it possible to secure necessary funds without diluting equity or the traditional assets required for collateral, such as property, equipment, or physical inventory.
LDQ Business Finance will be among the dominant players in the finance industry’s emerging crypto space, helping businesses access the financing they require to grow, with the development of our crypto lending platform. Our team takes an individual approach to each client and will work with you to determine how cryptocurrency collateral can support your capital financing. Find out more about the development of our crypto-backed business loans at LQD Business Finance.