Over 560 million individuals around the globe have invested in crypto assets, as TripleA Global Cryptocurrencies Ownership data reveals. This is quite a huge shift from conventional, centralised transactions. Financial institutions worldwide are now paying attention, and taking steps to integrate Blockchain technology into their systems to keep their clients satisfied. With that being said, the finance sector will see new crypto tokens begin to dominate the scene, as they have so much to offer. But what are they, and how do they impact global finance? Read on to find out more.
Crypto Tokens as Alternatives to Cryptocurrencies
Several crypto tokens have made a mark in the industry, one of which is the ERC-20 token DAI. The BTC Bull Token is another Ethereum-based token whose price is dependent on Bitcoin, such that its price rises by 3% when Bitcoin prices rise. However, since tokens are much easier to create than coins, it’s not surprising that new alternatives grace the market with their presence. With that in mind, crypto tokens keep evolving as the crypto industry matures.
For instance, AI tokens are beginning to gain traction in the crypto industry. These digital assets are built on Blockchain, but they are more geared towards AI applications and platforms. They can be used for any transactions on AI marketplaces, smart contracts automation, or give holders governing rights on decentralised AI platforms. While many AI token projects are still underway, there’s no missing their potential to change how people use money around the world, which will increase their investment value. Already, the GRT token, TAO token, Render token, and NEAR token are out there.
Although DeFi is now a household name for crypto enthusiasts, new tokens keep coming to the surface, as anyone with the technical skills can develop one. As the name implies, DeFi tokens are meant for decentralised financial platforms, each one performing a specific function, whether it’s lending, staking, governance, or transactions. Popular DeFi tokens include AAVE (for lending and borrowing on the Aave platform), UNI (for liquidity provisions and governance on Uniswap), and COMP (for governance, lending and borrowing on the Compound Protocol).
The fight for a sustainable world continues, and the crypto industry is also playing its part. DeFi sure is great for finance, but there’s the issue of excessive energy consumption to be addressed. Thankfully, environmental tokens can be a step towards solving this problem. These digital assets help eco-conscious individuals or organisations to invest in sustainability and get environmentally friendly products and services. Now, we can expect power tokens, waste management tokens and carbon removal tokens to become more mainstream.
How New Tokens are Reshaping Banking, Payments, and Investments
Banking may be mainstream, but with the number of people embracing the crypto industry, it may soon lose its relevance if it doesn’t evolve with the changing times. This is because people are not pleased with the tedious transaction processes and delays, cumbersome paperwork, high costs, and security risks inherent in the traditional banking system. Embracing Blockchain technology, and ultimately crypto tokens may be what the banking sector needs.
Without the need for intermediaries, crypto token transactions are much faster and less expensive. So allowing their clients to trade or invest in assets with tokens or coins can put them in a positive light. Plus the smart contracts on Blockchain aren’t easily manipulated thus there is the benefit of enhancing security. Banks can even develop and issue their tokens, a way to integrate with the crypto industry and improve their customer experience. Already, it has been reported in the news that J.P. Morgan is leading the charge with the JPM Coin released in 2019.
Challenges with New Tokens in Global Finance
Tokens are not risk-free, as Blockchain is not flawless. First, traditional banks and financial institutions must think about the rapidly changing prices of these assets and their lack of intrinsic value. They can quickly lose their value market sentiments or demand and supply isn’t buyer-centric or bullish, which isn’t what institutions and clients want. Aside from this, integrating decentralised crypto tokens would mean banks would not have total control over them, which may clash with their centralised systems. Moreover, KYC and AML regulations aren’t concrete enough to stop money laundering and fraud on crypto platforms, which means that institutions risk reputation damage if they can’t protect their client’s digital assets.
In Summary
Crypto tokens are gradually making their way into global finance, now that Blockchain is being adopted by major financial institutions all over the world. Its structure and applications make it attractive for these institutions to incorporate them into their systems. There may be challenges with new and old crypto token uses, but its potential can’t also be ignored. As the crypto industry keeps evolving, solutions to these issues will arise soon. Financial institutions are rightfully positioned to reap the benefits in the cryptocurrency space. For one thing, they already have a customer base and can also take the right steps to reduce risks or complications with eMoney as they reap the benefits of the technology.
David Prior
David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.
