Crypto-native and crypto-curious businesses are creating a massive demand for transactions that simply isn’t being met by the traditional banking sector.

The banking sector has historically done a pretty good job of taking care of transactions. While cash still reigns supreme in emerging markets such as India or Indonesia, most payments in mature economies from the United States to South Korea are now mediated by banks. And banks have done very well out of this activity, with global payments revenues topping $2 trillion in 2019, before COVID-19 caused a slight drop. But there is one growing area of transactions which banks are unable to address - and which is crying out for support. 

This new frontier for commerce and payments is linked to Web 3.0, an emerging iteration of the World Wide Web that uses blockchain technology to enable decentralised, token-based commercial exchanges. Aiming to counter the dominance of Big Tech in today’s online environment, the Web3 Foundation describes Web 3.0 as “a decentralised and fair internet where users control their own data, identity and destiny.” 

From a financial perspective, this means empowering individuals to trade currencies, assets and valuable data without the need for intermediaries. An example of such trades is the exchange of non-fungible tokens (NFTs), which are unique data signatures attached to digital assets. Interest in NFTs has soared in recent years, mainly because of their association with digital art. 

Unlike cryptocurrencies, which have a common value linked to markets, the unique nature of an NFT means it can have a unique value, just like an original painting or sculpture does in the physical world. This has made NFTs a popular medium for proof of ownership of online artwork, gaming assets and other digital properties. 

NFTs are perhaps best known for allowing digital artists to secure eye-popping amounts for their artworks, with one NFT sale last year netting its creator, Murat Pak, the sum of USD 91.8m. More prosaically, NFTs are increasingly being seen as a way of adding unique value to digital products. Rock band Kings of Leon, for example, last year issued an album in the form of an NFT that gave purchasers access to special features including front-row seats for life.  

Such applications are leading to a surge of interest in blockchain-enabled transactions not just from crypto-native companies - those that employ cryptocurrencies as an intrinsic part of their value proposition - but also from what you might call ‘crypto-curious’ players. These are businesses that do not rely on cryptocurrencies for their operations but might nevertheless gain some form of competitive advantage or market differentiation from crypto applications. The NFT boom, for instance, has seen art galleries around the world diversify their offerings into the digital arena. 

Another example is global hotel group, The Pavilions Hotels & Resorts, which in July 2021 announced it would allow customers to pay for stays using any of more than 40 cryptocurrencies, including Bitcoin and Ethereum, through a partnership with payment gateway Coindirect (a sister brand to BVNK). The move was clearly designed to give the Hong Kong-headquartered company a unique selling point in the highly competitive hotels sector. "We are proud to lead the industry and enhance ourselves in the digital world with this exciting new crypto payment method," said founder and owner Gordon Oldham.

Such crypto-curious endeavours are adding to the momentum of blockchain-powered services, products and collectibles. According to DeFi distributed application store, DappRadar, the blockchain industry grew more than 500% year-over-year in the third quarter of 2021. Meanwhile, the NFT segment generated almost $10.7 billion in trading volume, a 704% rise over the previous quarter. “The space is evolving completely,” commented DappRadar. “NFT projects are finding their way to become more than simple profile pictures.”

Enthusiasm for the growth of this sector is often tempered by concerns about its volatility, but the impressive values being achieved by artwork NFTs underscore the fact that a growing number of high net-worth individuals see the assets as trustworthy investments. Furthermore, as The Pavilions’ managing director for Asia, Scot Toon, has pointed out, fiat currencies are not immune to price fluctuations. And the volatility of cryptocurrencies such as Bitcoin might be expected to fall as institutional investors continue to pile into the market. 

One barrier though that does stand in the way of increasing adoption by businesses of digital assets is the lack of support from traditional banks. Businesses with services and transactions based around digital assets still need to transact in fiat currencies with the wider world. These firms are crying out for a service that can bridge between fiat currencies and digital assets to manage payments, yield, trading and custody. 

As the year begins, and NFTs and the metaverse feature heavily in industry predictions, crypto-curious businesses are keen to embrace Web 3.0—even if traditional banks cannot see it yet.