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While the number of mobile payment solutions has increased over time, other digital financial services have also continued to develop. Blockchain-based solutions leveraging digital assets have become more sophisticated and more prominent.
Bitcoin and stablecoins are digital assets issued on a blockchain, a digital infrastructure that is used to deliver a broader range of decentralised applications.
The regulatory landscape around payments, digital assets, blockchain and DeFi is fragmented with a range of different approaches and outright gaps in some jurisdictions. International standard-setting bodies like the Financial Stability Board (FSB) and the Bank for International Settlements (BIS) are actively looking into ways to coordinate the regulation of digital assets and to enhance efficiency and address challenges. A few leading jurisdictions and the standard-setters are currently exploring how to first define and then regulate DeFi. While lacking in comprehensive legislation, some of the use cases of blockchain infrastructure and DeFi applications, are covered by existing legislation.
While the number of mobile payment solutions has increased over time, other digital financial services have also continued to develop. Blockchain-based solutions leveraging digital assets have become more sophisticated and more prominent.
Bitcoin and stablecoins are digital assets issued on a blockchain, a digital infrastructure that is used to deliver a broader range of decentralised applications.
The regulatory landscape around payments, digital assets, blockchain and DeFi is fragmented with a range of different approaches and outright gaps in some jurisdictions. International standard-setting bodies like the Financial Stability Board (FSB) and the Bank for International Settlements (BIS) are actively looking into ways to coordinate the regulation of digital assets and to enhance efficiency and address challenges. A few leading jurisdictions and the standard-setters are currently exploring how to first define and then regulate DeFi. While lacking in comprehensive legislation, some of the use cases of blockchain infrastructure and DeFi applications, are covered by existing legislation.
Enhanced Financial Efficiency
Increased transparency
for participants, with transactions recorded on an electronic ledger: a database held by all market participants, optimised to be widely accessible, synchronised, easily updatable, and tamper-proof.
Expanded Market Reach
Increased opportunities for access to finance, allowing MSMEs to develop scale.
Increased Resilience
The use of digital assets for transactions on the blockchain has the effect of minimising many of the risks associated with payments due to simultaneous exchange
on a single ledger, such as those around currency exchange and liquidity management.
Enhanced Financial Efficiency
Increased transparency
for participants, with transactions recorded on an electronic ledger: a database held by all market participants, optimised to be widely accessible, synchronised, easily updatable, and tamper-proof.
Expanded Market Reach
Increased opportunities for access to finance, allowing MSMEs to develop scale.
Increased Resilience
The use of digital assets for transactions on the blockchain has the effect of minimising many of the risks associated with payments due to simultaneous exchange
on a single ledger, such as those around currency exchange and liquidity management.
Bitcoin, created in 2009, operates on a blockchain. It serves various purposes, including as an investment, a form of payment, and a means of transferring money globally without relying on third parties like banks. Bitcoin possesses valuable properties such as acceptability, divisibility, durability, fungibility, portability, and scarcity.
Bitcoin’s decentralisation means that it operates independently of traditional banking systems and involves significantly lower fees. The global average cross-border remittance fee is between 6-7%.
Additional benefits of Bitcoin are relatively low barriers to entry.
Stablecoins, introduced in 2014, provide a more reliable and faster interchange between fiat currencies and digital assets, being redeemable at 1:1 against USD or local currencies anytime by users.
There is growing interest from merchants in accepting Bitcoin and stablecoins as a form of payment. Data from Deloitte reported that roughly 2000 US businesses accepted Bitcoin in late 2022 out of 15,000 worldwide – an increasing number of companies worldwide are using Bitcoin and other digital assets for a host of investment, operational and transactional purposes.
Surveys of consumers suggest that people with below-average income more frequently use bitcoin to send money and buy goods and services than people with above-average incomes. The most common reason people have for buying Bitcoin is as a speculative investment, but if the reasons for purchase are broken down by income group, it appears that higher-income individuals drive this perception.
Digital assets can be securely stored and transferred independently of traditional banking rails via self-custodial wallets. Unlike custodial wallets, where a centralised third party (like a bank or a cryptocurrency exchange) hold the assets, self-custody puts control back in the hands of users by ensuring they own the ‘keys’ required to manage, move, and use their digital assets. These wallets can take various forms, including a browser extension wallet, a desktop application, a mobile application, or a hardware wallet. Self-custodial wallets offer a secure way to store the keys to the blockchain network, which need to be kept private. They are similar to password managers, securing, encrypting, and enabling user-friendly access to a multitude of complex passwords, whilst ensuring the user retains control and responsibility. Self-custody also reduces counterparty and segregation risks, as customers no longer have to rely on a third-party custodian, who often holds multiple assets in centralised storages, and may be vulnerable to risks such as financial crises, bad governance, bankruptcy, or hacks.
Self-custodial wallets can also hold other documents, e.g., driver’s license as a form of identification. This is often more secure than the physical equivalent, which can be stolen or cloned and often underpins identity theft. This functionality is also important for displaced entrepreneurs to provide an alternative means of identification when being onboarded by financial services providers, installing POS software, verifying a client’s identity, etc.
US businesses accepted Bitcoin in late 2022 out of 15,000 worldwide
of merchants that currently accept digital assets as a payment instrument have seen a positive impact on their business’ customer metrics
of merchants see immediate access to funds by accepting digital currency payments
Bitcoin, created in 2009, operates on a blockchain. It serves various purposes, including as an investment, a form of payment, and a means of transferring money globally without relying on third parties like banks. Bitcoin possesses valuable properties such as acceptability, divisibility, durability, fungibility, portability, and scarcity.
Bitcoin’s decentralisation means that it operates independently of traditional banking systems and involves significantly lower fees. The global average cross-border remittance fee is between 6-7%.
Additional benefits of Bitcoin are relatively low barriers to entry.
Stablecoins, introduced in 2014, provide a more reliable and faster interchange between fiat currencies and digital assets, being redeemable at 1:1 against USD or local currencies anytime by users.
There is growing interest from merchants in accepting Bitcoin and stablecoins as a form of payment. Data from Deloitte reported that roughly 2000 US businesses accepted Bitcoin in late 2022 out of 15,000 worldwide – an increasing number of companies worldwide are using Bitcoin and other digital assets for a host of investment, operational and transactional purposes.
Surveys of consumers suggest that people with below-average income more frequently use bitcoin to send money and buy goods and services than people with above-average incomes. The most common reason people have for buying Bitcoin is as a speculative investment, but if the reasons for purchase are broken down by income group, it appears that higher-income individuals drive this perception.
Digital assets can be securely stored and transferred independently of traditional banking rails via self-custodial wallets. Unlike custodial wallets, where a centralised third party (like a bank or a cryptocurrency exchange) hold the assets, self-custody puts control back in the hands of users by ensuring they own the ‘keys’ required to manage, move, and use their digital assets. These wallets can take various forms, including a browser extension wallet, a desktop application, a mobile application, or a hardware wallet. Self-custodial wallets offer a secure way to store the keys to the blockchain network, which need to be kept private. They are similar to password managers, securing, encrypting, and enabling user-friendly access to a multitude of complex passwords, whilst ensuring the user retains control and responsibility. Self-custody also reduces counterparty and segregation risks, as customers no longer have to rely on a third-party custodian, who often holds multiple assets in centralised storages, and may be vulnerable to risks such as financial crises, bad governance, bankruptcy, or hacks.
Self-custodial wallets can also hold other documents, e.g., driver’s license as a form of identification. This is often more secure than the physical equivalent, which can be stolen or cloned and often underpins identity theft. This functionality is also important for displaced entrepreneurs to provide an alternative means of identification when being onboarded by financial services providers, installing POS software, verifying a client’s identity, etc.
US businesses accepted Bitcoin in late 2022 out of 15,000 worldwide
of merchants that currently accept digital assets as a payment instrument have seen a positive impact on their business’ customer metrics
of merchants see immediate access to funds by accepting digital currency payments
CASE STUDY
Bitkey, built by Block, Inc., is a hardware self-custody wallet that brings together software, hardware, and advanced security to modernise Bitcoin ownership. As a 2-of-3 multi-signature wallet, Bitkey has three private keys protecting the users’ digital assets. Two out of three keys are required to sign a transaction, giving the user extra protection, and ensuring that users can always recover their funds if they lose a key.
CASE STUDY
Bitkey, built by Block, Inc., is a hardware self-custody wallet that brings together software, hardware, and advanced security to modernise Bitcoin ownership. As a 2-of-3 multi-signature wallet, Bitkey has three private keys protecting the users’ digital assets. Two out of three keys are required to sign a transaction, giving the user extra protection, and ensuring that users can always recover their funds if they lose a key.