It’s a long-standing narrative that large-scale crypto adoption is inevitable. After all, because cryptocurrency is native to the internet, shouldn’t it keep up with the rise of internet users? If we compare the two, global crypto adoption outpaced Internet growth by almost 2x, 113% vs 63% respectively.
However, what does crypto-adoption look like on a more granular level? Should we expect linear growth or will it reach a ceiling? While it might seem logical that netizens would simply jump into the crypto pool, a recently released survey by the Federal Reserve suggests otherwise.
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The Fed’s Consumer Survey Examined
For the first time, the Federal Reserve’s annual consumer report included cryptocurrencies and Buy Now, Pay Later (BNPL) products. When considering any new technology adoption, consider the number of steps required to dive into it, past habits, and perceived benefits for changing habits.
Based on these three criteria alone, if one assumed that cryptocurrencies would lag behind, that assumption would be correct. The survey showed that only 3% of adults use cryptocurrencies as payment methods – direct purchases or money transfers. Instead, most people who own crypto assets, 12% of US adults according to the survey, use them for investment purposes.
Interestingly, of those 3% who use crypto assets for payments, 13% did not have a bank account and 27% did not have a credit card. By comparison, 6% of unencrypted users are unbanked, while 17% do not have a credit card. On the opposite end of the spectrum, 99% of adults who used crypto assets to invest had bank accounts.
This bifurcation of crypto usage goes further when considering income levels. 46% of adults who use crypto assets as investment vehicles have income above $100,000, while 29% of adults in the same category have income below $50,000.
From these data, we can conclude that alternative financial payments are gaining ground if banking services are not available. A total of 81% of fully banked adults have not only avoided cryptocurrencies, but also other alternatives: payday loans, pawnbrokers, tax refund advances, money orders, auto title loans, and banking services. check cashing.
At the same time, there are many ways to improve existing banking services, including offering free current accounts, depending on business use. Despite these offers, a surprising number of Americans are still unbanked.
Combined with the divergence in income levels, the survey paints a somewhat predictable picture. The vast majority of people see money as a means to an end, using the most common banking services available.
At the same time, the minority who take the time to dabble in alternatives perceive crypto assets as bets for the future, instead of a serious day-to-day alternative payment system.
If so, how can crypto adoption increase?
Institutional Crypto Integration
According to USAFacts, 53% of U.S. households owned publicly traded stocks in 2019, representing a 32% increase in adoption from 1989. However, there is a catch even to this adoption of mainstream assets. . Only 15% of US households held stocks directly.
Reflecting the split in the use of crypto, the rest of the shareholding remains in a variety of investment vehicles: 401(k) retirement savings, ETFs, and Roth IRAs (individual retirement accounts with no early withdrawal penalty) .
Importantly, one remaining barrier to entry for crypto assets is the lack of a streamlined user experience. Many of the space’s vaunted features require an advanced level of technological knowledge. Yet we see the exact opposite with traditional investment vehicles such as 401(k), ETFs, and Roth IRAs. Many trusted brokers for Roth IRAs offer access to stocks, bonds, mutual funds, and even real estate. It is reasonable to think that BTC, or even a BTC ETF, will one day be available.
This brings us to an obvious conclusion. If crypto adoption is to continue without hitting a hard cap, it should be integrated as an asset alongside these indirect holdings and their many benefits.
It seems that Fidelity Investments, with its $4.2 trillion in assets under management, understood this by offering Bitcoin as a 401(k) option. Yet Fidelity’s pioneering attempt met with stiff resistance from the US Department of Labor, which issued a warning to employers:
“At this early stage in the history of cryptocurrencies, the Department is seriously concerned about the prudence of a fiduciary’s decision to expose participants in a 401(k) plan to direct investments in cryptocurrencies. or other products whose value is tied to cryptocurrencies.”
In the meantime, Senator Tuberville introduced the Financial Freedom Act to counter the department’s directive to prevent a tidal wave of crypto investments in retirement savings plans.
In this catch 22 for crypto adoption, another major issue emerges – CBDCs (central bank digital currencies). The central bank and legislature aim to supplant the efficiency of crypto payments by bringing CBDCs to the fore. Rep. Maxine Waters, chair of the House Financial Services Committee, recently done it’s clear.
“Central Bank digital currencies have the potential to harness the efficiency of cryptocurrencies while providing security and stability to the US dollar, backed by the full confidence and credit of the federal government.”
If such a scenario were to unfold, cryptocurrencies would lose their appeal under terms like “convenience” and “efficiency.” Even SWIFT is testing multi-CBDC cross-border payment transfers to make them frictionless.
Because most people see money as a means to an end, a digital number displayed on one app would be no different than the other. Ultimately, we could end up with a core investment class that diversifies its portfolio with Bitcoin as a hedge against currencies and inflation. Specifically, using borderless and nationless assets as a hedge against inflation and geopolitical uncertainty.
Others may invest in smart contract platforms like Ethereum and others, which have the potential to perform some of today’s functions that are currently limited to banks. However, the DeFi sector has done itself no favors after the recent collapse of Terra, with its 20% return Anchor protocol now defunct. After all, spectacular failures tend to enter the public realm more than the minutia of blockchain technology.
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