Hi all, Natalie here.
I’m a Partner at Lightspeed based in the Bay Area, and I love working with fintech and crypto founders. The other day, I was thinking about the first time I heard about Bitcoin. It was in 2012, and someone told me about a group of friends trying to buy from Silk Road and use Bitcoin as currency because it was “untraceable.” My first thought was that if I could go back in time 10 years, I would have told myself to use as much of my savings as possible to invest in Bitcoin and transfer it to a digital wallet and I’d now be a Bitcoin Billionaire.
My second thought, after coming to terms with the fact that I did not infact put all of my money in crypto and make billions, was around how much easier it is today to buy, trade or use cryptocurrencies for purchases. That’s mostly due to fintech apps (both crypto and non-crypto) providing a simple way for everyday consumers to trade and store it. Until recently, only the hardcore enthusiasts and professionals have been vocal about using it at all. Today, nearly everyone has some knowledge of cryptocurrency or has heard of it. More importantly, there are several mainstream fintech companies within the financial industry that are unlocking the potential of crypto for everyday consumers.
Companies That Are Making Moves
Just look at Robinhood’s earnings report out this week. Roughly 60% of funded accounts traded crypto in the most recent quarter, and more people actually made their first trade in crypto rather than in equities. With that rise, crypto accounted for 52% of revenue vs 17% in the previous quarter. That was unimaginable even a few months ago!
The recent Coinbase IPO and boom of several major exchanges like FTX, Gemini, and Binance, we’re seeing real traction. If a fintech company wants to become a global company, they need to figure out their crypto strategy. Not only is it a global phenomenon that everyone is interested in, but it circumvents many of the inconveniences associated with FX.
We now have every large tech company thinking about its strategy, with internal teams diving into crypto, evaluating new currencies and protocols. There’s also the rise of decentralized finance (DeFi) from 2020, with tech giants now having a lot more planned under the hood for this space.
Reddit announced it would be using Arbitrum to handle scaling its Ethereum-based Community Points system
Not to mention, if you search job postings for “Smart Contract Engineer”, “Blockchain Product Lead”, or “Software Engineer, Crypto”, I guarantee you can come up with an even longer list with roles from Amazon, Reddit, Walmart and more.
Why Aren't More Companies Embedding Crypto?
So ok, with all of this going on and everyone exploring these options, why aren’t even more companies making moves? The main roadblock I’ve seen is around compliance and regulation. The government and financial regulators hold the keys to crypto adoption, and there’s a serious lack of understanding when it comes to crypto. The current party in office, Secretary of the Treasury, and heads of large financial institutions such as the Federal Reserve are still getting educated on the topic. While progress is being made, until crypto can figure out bulletproof (or at least much more solid) consumer protection, traditional financial institutions will hesitate to embrace it.
The recent bipartisan crypto infrastructure bill, for instance, is a perfect example of the disconnect.
Where Does DeFi Fit In?
If you’re getting up to speed, I wrote a must-read primer on how DeFi is disrupting traditional finance. But essentially, DeFi is the frontier of crypto innovation. The problem again is that it’s very far ahead of where governments and regular consumers are comfortable with. There’s a journey from crypto non-believer to curious, and then an even longer one to crypto native. And up until now, the UX in DeFi has been complicated and unapproachable for the crypto curious.
I’d love to see a future with fintech companies truly helping emerging markets using DeFi and crypto. Perhaps I’m exceptionally interested in this due to my Southeast Asian heritage, since in emerging markets like the one my parents grew up in, traditional banking doesn’t cut it. No wonder so many people are still underbanked. As both an investor and on a more personal level, I think global fintech companies are in a great position to lead this change. It could be the key to unlocking a lot of untapped potential for those that need it most.