Digital assets set to become integral in financial system
IN the coming decade, digital assets are set to transform the very fabric of our financial system.
Far from being a niche or speculative phenomenon, these assets, I believe, will become a linchpin of financial stability, efficiency, and innovation.
Digital assets encompass a range of technologies from cryptocurrencies and stablecoins to tokenised assets and blockchain-based financial instruments. While some might dismiss these as mere fads or high-risk investments, they are, in fact, poised to redefine the landscape of global finance.
At the heart of this transformation is blockchain technology, which provides an unprecedented level of transparency and security.
Every transaction is recorded on a public ledger, immutable and visible to all participants. This radical openness reduces opportunities for fraud and corruption, enhancing trust in financial systems.
As more institutions and governments adopt blockchain, we will see a significant reduction in transaction costs and processing times. The inefficiencies and opaque practices that have long plagued the financial sector will become relics of the past.
One of the most profound impacts of digital assets will be on financial inclusion. Traditional banking systems have long excluded millions of people globally due to logistical and infrastructural limitations.
Digital assets, however, only require access to a smartphone and the internet. This means that individuals in remote or underserved regions can participate in the global economy, access credit, and invest in opportunities that were previously out of reach. The democratisation of financial services will drive economic growth and reduce inequalities, fostering a more inclusive global financial system.
The traditional financial system is also encumbered by layers of intermediaries, each adding their own costs and delays.
Digital assets eliminate many of these intermediaries by allowing direct peer-to-peer transactions. This not only accelerates the speed of transactions but also reduces the associated costs. For instance, cross-border payments, which can take days and involve hefty fees, can be completed in minutes with digital assets, often at a fraction of the cost.
This efficiency will be a game-changer for businesses and consumers alike, making transactions faster, cheaper, and more accessible.
Furthermore, the rise of digital assets is fuelling innovation in financial products. Smart contracts - self-executing contracts with the terms of the agreement directly written into code - are one such innovation. These contracts automatically enforce and execute the terms of an agreement, reducing the need for intermediaries and lowering the risk of disputes.
Additionally, tokenisation - the process of converting assets into digital tokens - will allow for new investment opportunities and more liquid markets. Real estate, art, and even shares in private companies can be tokenized, broadening access to a wider range of investors and creating new revenue streams.
The financial crisis of 2008 and subsequent economic upheavals have highlighted the vulnerabilities of traditional financial systems.
Digital assets, built on decentralised networks, offer a hedge against some of these risks. They are less susceptible to centralised points of failure and systemic shocks, providing a more resilient alternative.
As we move forward, integrating digital assets into the mainstream financial system will enhance overall stability and reduce the likelihood of catastrophic failures.
In a world where technological advancement is relentless and financial systems are increasingly globalised, digital assets represent the future.
Their capacity to provide transparency, efficiency, inclusivity, and resilience makes them the ideal foundation for the financial system of the next decade. As we stand on the brink of this transformative era, embracing digital assets is not just an option, I believe it’s an imperative.
The financial world is evolving fast, and those who recognise and harness the potential of digital assets will be at the forefront of this revolution, shaping the future of global finance.
Nigel Green, deVere Group CEO and Founder
