In November, CoinsDo attended Money20/20 in Las Vegas, where leaders in finance and technology converge to shape the future of money. Thinking we’d see a sizable contingent of crypto-related financial service providers, we were rather surprised to find that their presence was notably subdued. This observation led me to reflect on the current state of the crypto industry within mainstream finance. In this blog, we'll share our insights, delve into possible reasons behind these trends, and explore what they might mean for the future of digital currencies.

Observation #1: The Subdued Presence of Cryptocurrency Companies

Walking through the conference halls, it was evident that crypto firms were not as prominent as one might expect at such a significant financial event.

One possible explanation for the reduced presence is the increasing regulatory scrutiny the crypto industry faces. In the United States, agencies like the Securities and Exchange Commission (SEC) have intensified their focus on cryptocurrency regulations. According to a report by PWC, this is raising the bar for crypto firms to fall in line with

traditional financial services obligations, a bar that not many crypto firms are able to clear currently, possibly reducing their visibility at mainstream events.

Another factor could be the market volatility experienced over the past year. The crypto market has seen significant fluctuations, and the hacking of major exchanges like Wazir X have shaken investor confidence. This environment might encourage companies to focus on consolidation and stability rather than broad promotional efforts.

Observation #2: Traditional Applications Take Center Stage

Despite the lower visibility, the crypto companies present were emphasizing traditional financial applications of blockchain technology.

Many firms showcased solutions like cross-border payments and crypto payment acceptance systems. This shift suggests a strategic move to demonstrate real-world utility. By addressing tangible problems—such as high transaction fees and slow processing times in international payments—they aim to integrate more seamlessly with existing financial systems.

This trend aligns with the broader industry movement towards practical blockchain applications. Deloitte’s Global Blockchain Survey found that 83% of surveyed executives see compelling use cases for blockchain in enhancing existing financial processes.

Focusing on established use cases could accelerate mainstream adoption. However, it might also sideline more innovative, disruptive aspects of crypto technology. Striking a balance between practical solutions and pioneering developments is crucial for the industry's growth.

Observation #3: The Dominance of Third-Party Custodial Solutions

A notable observation was the prevalence of third-party custodial services for crypto assets.

The reliance on custodial solutions indicates that many users and institutions prioritize security and convenience over complete control of their assets. Non-custodial solutions, while offering greater autonomy, require users to manage their own private keys—a responsibility that can be daunting.

Our own informal survey at Money20/20 also shows that institutional investors prefer custodial services due to regulatory compliance and risk management considerations.

We believe that the market's readiness for non-custodial solutions is hindered by factors such as lack of user-friendly interfaces, security concerns, and limited regulatory clarity. Overcoming these challenges is essential for broader adoption of non-custodial crypto solutions.

Observation #4: The Rise of AI and Regtech at Money20/20

One of the most prominent themes at this year's conference was the integration of artificial intelligence into financial services, encapsulated by the event's theme: "Human x Machine.

The convergence of "Human x Machine" signifies an industry recognition that combining human expertise with machine efficiency can lead to better outcomes. By leveraging AI, financial institutions can enhance their capabilities without replacing the essential human judgment required in nuanced decision-making.

We believe this explains the significant presence of regtech companies, especially those offering eKYC solutions powered by AI. These technologies are designed to streamline the customer onboarding process, enhance security, and ensure compliance with regulatory requirements.

Why the Focus on AI-Powered Regtech?

Increasing Regulatory Demands: Financial institutions are under growing pressure to comply with complex regulations aimed at preventing fraud, money laundering, and terrorist financing. AI-powered eKYC solutions can process vast amounts of data quickly and accurately, reducing the risk of non-compliance.

Efficiency and Cost Reduction: Manual compliance processes are time-consuming and costly. AI automates these tasks, saving time and resources. A study by Accenture found that AI could help banks reduce operational costs by up to 30%.

Improved Customer Experience: Faster onboarding processes enhance the customer experience. AI can verify identities in real-time, allowing customers to open accounts or access services without lengthy delays.

Observation #5: Increased Interest from Venture Capitalists

Despite the quieter presence of crypto firms at the forefront, there’s been a noticeable surge of interest from venture capitalists (VCs) diving deeper into the crypto space. This uptick signals a shift in investor sentiment, with many VCs appearing increasingly willing to embrace the inherent risks of the industry. What’s driving this shift? A growing sense that the U.S. regulatory environment may soon provide clearer and more stable guidelines for the crypto market.

The anticipation of more defined regulations is a game changer. Uncertainty has long been a barrier to broader investment in crypto, but with both major U.S. presidential candidates recently signaling crypto-friendly positions, there’s renewed hope for supportive policies that could legitimize and stabilize the industry. For VCs, this suggests a reduced risk landscape and the potential for more predictable returns—making now a prime time to back innovative projects.

This growing VC interest is a lifeline for the crypto industry. Access to funding could empower startups to bring transformative ideas to life, from decentralized finance (DeFi) platforms to cutting-edge blockchain applications. For entrepreneurs, it’s an exciting moment: a chance to secure the resources needed to scale their vision and make an impact in a space that’s ripe for disruption.

Final Thoughts

Reflecting on our time at Money20/20, it's clear that the crypto industry is at a crossroads. The subdued presence of crypto companies and their focus on traditional applications suggest a strategic shift towards integration with mainstream finance and a response to regulatory pressures.