Regulation, user trust and tech restrictions stand in the way of mass crypto (banking) adoption, says Brighty CTO Nikolay Denisenko
In an interview with cryptonewsNikolay Denisenko, Co-Founder and CTO of Mobile Digital Finance bright app and former lead backend engineer at neobank revolutionHe talked about the main challenges that crypto companies face when moving to neobanking.
Furthermore, he discussed how neobanks can use DeFi to offer enhanced services, opined that the role of neobanks will expand with market developments, and argued that these new institutions will prompt traditional banks to step up their game.
This is what he had to say.
Key challenges to overcome
Widespread adoption of crypto banking depends on industry players and regulators jointly overcoming challenges related to regulation, trust, and technological limitations, Denisenko said.
There are several major challenges in making the transition from traditional banking to neobanking, Denisenko said. cryptonews.com. These also present barriers to crypto adoption.
First, crypto companies face regulatory hurdles. The banking industry is heavily regulated, but the digital space needs a “strong regulatory framework” to become part of the global financial system.
Then there is a general lack of understanding and trust: many people still view cryptocurrencies as risky or speculative investments.
Earning customer trust is especially difficult with “tough” competition from established financial institutions.
Offering top-notch security for new technology-based products is key, Denisenko argued. Companies need to invest in measures like multi-factor authentication, encryption, and audits.
Lastly, fintechs and neobanks must build a robust technology infrastructure, with the goal of creating “scalable and reliable systems to support real-time transactions,” the CTO said.
However, according to Denisenko,
“Given the current regulatory landscape, the outlook for cryptocurrency adoption and fintech growth in Europe is generally optimistic.”
This is largely due to the EU’s efforts to provide “a clear and harmonized framework” with its Crypto Asset Markets (MiCA) regulation.
Web3 Tech can provide secure, efficient and transparent financial services
Denisenko noted that decentralization is a core tenet of Web3 and said that,
“Neobanks and fintechs can take advantage of it to create safer, more efficient and transparent financial services that empower users and give them greater control over their assets.”
As decentralized finance (DeFi) encompasses a wide range of financial products and services, including lending platforms, decentralized exchanges (DEXs), and yield farming, its integration enables companies to offer clients “more diverse and sophisticated financial solutions.” “.
Denisenko argued that,
“As cryptocurrencies and DeFi grow, they can help democratize finance.”
Current state of neobanking in the EU
EU neobanking, Denisenko argued, is characterized by “significant growth and innovation.”
There has been “a surge” in the number of established neobanks and financial institutions launching their digital banking offerings.
In addition, many European neobanks expanded their operations outside the EU and into North America, Asia, and other regions.
Denisenko said that,
“This expansion highlights the global potential of neobanking services and the ability of European neobanks to scale and compete in international markets.”
The role of neobanks is only likely to increase with market developments, as customers seek more diverse, convenient, and cost-effective banking solutions.
That being said, there are some gaps that EU neobanks need to fill in order to achieve long-term success:
better integration of fiat and crypto services to provide a comprehensive solution;
offer advanced DeFi products to appeal to a broader user base;
implement fallback testing to help build user trust;
simplifying the user experience, reducing fees and offering educational resources to improve accessibility.
The future of the industry
In the next ten years, Denisenko opined, as regulations like MiCA mature and technological advances simplify the use of cryptocurrencies, crypto banking is likely to become more mainstream.
Denisenko said that,
“Neobanks and fintechs that focus on DeFi and crypto will continue to gain market share, pushing traditional banks to step up their game. We might even see the rise of “DeFi banks” that fully embrace blockchain technology and cryptocurrencies.”
That being said, mass adoption still depends on industry players, regulators, and legislators working together to overcome the challenges mentioned above.
– Brazil’s Nubank remains bullish on cryptocurrencies – South Korea’s largest neobank reportedly on the brink of a crypto exchange banking deal
– JPMorgan partners with 6 Indian banks on blockchain-based interbank transactions – Binance in talks to allow traders to hold collateral in a bank: Bloomberg
– What is DeFi? Decentralized Finance Explained – Yield farming, liquidity mining, staking and its risks