A report by Ripple suggests that most financial institutions plan to start using crypto within the next three years.
Despite the bear market, financial institutions remain interested in the cryptocurrency space. Just this week, $10 trillion asset manager BlackRock launched a spot Bitcoin trust while saying that it’s also exploring “permissioned blockchains, stablecoins, cryptoassets, and tokenization.”
While BlackRock is exploring the potential financial benefits of cryptocurrencies for its clients, other financial institutions are looking at how blockchain-based technologies can improve their operations.
76 percent of the financial institutions surveyed by Ripple said they plan on using crypto within the next three years, assuming that regulations allow for it.
The number one reason, for both financial institutions and enterprises, to support cryptocurrencies would be their widespread use for payments. The second main reason for adoption is the use of crypto as a hedge of one form or another. The third reason is to use crypto as a bridge currency.
Tesla famously stopped accepting Bitcoin as a payment method last year, with CEO Elon Musk citing the environmental impact. Musk said that he’d consider accepting Bitcoin again if there was sufficient evidence of the network using predominantly renewable energy.
However, both Tesla and BlackRock are in the minority regarding their sustainability concerns.
“We were disappointed to see that for both financial institutions and enterprises, sustainability ranked relatively low as an attribute they would consider when selecting a specific cryptocurrency,” wrote Ripple in its report.
“All cryptocurrencies are not the same when it comes to sustainability. For example, blockchains that leverage proof-of-stake consensus mechanisms, or federated consensus mechansisms, feature very low energy usage. Crypto is not inherently energy intensive: it depends on the consensus mechanism and the community’s commitment to sustainability.”
The largest cryptocurrency, Bitcoin, uses the energy-intensive Proof-of-Work (PoW) consensus. The second-largest, Ethereum, is set to switch from PoW to the far more environmentally-friendly Proof-of-Stake (PoS) consensus next month in an event called ‘The Merge’.
While enterprises and financial institutions currently have little regard for sustainability, consumers do. Ripple’s study highlighted that over 75 percent of consumers would prefer to buy sustainable cryptocurrencies. Over 21 percent would only buy sustainable cryptocurrencies.
40 percent of respondents believe crypto will have a “massive” impact on finance and society.
The three leading perceived benefits of using crypto for organisations are:
- Give more people access to financial services
- Give more people a better deal when using financial services
- Create new revenue opportunities with current customers
Governments around the world are also exploring the adoption of cryptocurrencies to improve their financial systems and secure early leads in Web3. The UK, for example, recently set out its plans to make the country a global crypto hub.
“It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country,” said Rishi Sunak, then-Chancellor of the UK Exchequer.
“We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term. This is part of our plan to ensure the UK financial services industry is always at the forefront of technology and innovation.”
It’s estimated that 80 percent of central banks around the world are considering the launch of a Central Bank Digital Currency (CBDC).
According to Ripple’s survey respondents, the three main benefits of CBDCs are:
- Enhanced national competitiveness in the global economy
- Payments system efficiency
- Foster innovation, new use cases
“We believe the CBDC token type will have a powerful and lasting impact in nations around the world — alongside other token types including cryptocurrencies, stablecoins and NFTs — because the CBDC represents national currencies in the Internet of Value,” explained Ripple.
85 percent of respondents believe CBDCs will be adopted in their country within the next four years.
You can find a full copy of Ripple’s report here (registration required)
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