What Steps Remain For Crypto To Achieve Mainstream Institutional Adoption?
Over the past few years, the crypto space has seen increased investment from institutional investors. The number of investors from this category that have joined the space, especially this year, has jumped significantly as more institutions feel the market is getting too big to ignore.
The likes of MicroStrategy and Tesla have led the way with massive Bitcoin investments, which has seen others feel comfortable joining. Mark Cuban was one of the latest entrants to the market after investing in Polygon, which helps Ethereum become interoperable with other blockchains and more scalable. Also, he has been one of the celebrities to endorse Dogecoin, claiming to have bought his son some DOGE for educational purposes.
Crypto Image Has Been Tainted
Despite the rise in institutional investors lately, the number is still low compared to other industries where these individuals feel more comfortable putting the money. The problem with crypto has been its image has been tainted over the short period it has been around, chiefly due to a lack of regulation around these assets.
It’s new tech that regulators are yet to understand. Those who are more open to its potential are careful to come up with frameworks to govern this industry without stifling innovation. However, this has been the case for some lawmakers who have opted to ban digital currencies within their jurisdictions outrightly.
For the most part, crypto is seen as the wild west due to a lack of adequate regulations. This has allowed for the existence of scammers who have stolen billions of dollars from unsuspecting investors. According to a recent report by Cointelegraph, about $42 billion has been taken from investors through exchange hacks, scam projects, rug and pull scams, and other forms of trickery. That is quite alarming no matter from which side you look at it. Below let’s explore a few measures that can be taken to convert institutional interest into investment.
As the figure above indicates, security is a significant issue within the crypto space. There is a need to address various loopholes that make it possible for criminals to steal from investors within the space. Regulators have stepped up measures to combat the issue by requiring exchanges, especially centralized ones, to hold licenses to offer their services. This includes being audited as secure platforms that don’t endanger user funds. Also, some platforms have invested in insurance funds to ensure they reimburse users in case of a breach. These measures have seen the number of frauds resulting from fake platforms and the number of funds stolen from major exchanges drop. In 2019, the figure from thefts, hacks, and frauds stood at $4.5 billion, but that figure dropped by more than half to about $1.9 billion by the following year.
Such measures are encouraging and show institutional investors that it’s ok to enter the market since they know their funds are safely secured.
Another problem that has plagued cryptocurrencies has been a lack of usability. Especially when it comes to accessing tokens and engaging in various activities such as transacting and trading. In the earlier days of crypto, UX wasn’t prioritized since most individuals involved with the space had the technical know-how to dig around and get various things done. However, as the market grew and attracted less technical individuals, the exchanges shifted to developing consumer-facing UX. Even though the UX has improved significantly since the early days, there is still some way to go before newcomers can easily navigate various platforms.
Today, it takes users an average of 336 exchanges to buy, sell and hold various digital currencies. This means the average trader needs to go through at least three separate interfaces, go over the KYC of all of them and track the spot prices on all of them simultaneously. This can be a daunting task for even experienced traders.