Experts say 2021 is poised to see greater adoption and venture capital investment in blockchain technology. That prediction comes as more financial services apps are built using blockchain technology and cryptocurrency has become more widely accepted.
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Also working in the industry’s favor is the fact that major financial services companies including PayPal, Visa and JPMorgan have adopted cryptocurrency as a payment method in the past year, as well as more startups coming on the scene—armed with capital—to develop more user-friendly blockchain platforms.
Still, blockchain faces hurdles, including volatility in cryptocurrency pricing and confusion and misunderstanding from many consumers about the technology and related financial services, experts say.
Blockchain is digital information that is stored in a public database, and the benefit, particularly in the financial sector, is the ability to have a shared ledger recording detailed transactions without any identifying information, leading to improved security.
Investment in this space is growing, particularly in Europe, which has been quicker to adopt enterprise blockchain, which includes financial services, health care, energy and food and agriculture, said David Chreng-Messembourg, co-founder and partner at LeadBlock Partners in London. LeadBlock is a venture capital fund investing in early-stage business-to-business blockchain startups.
“We expect a funding need of more than 350 million euros [about $425.5 million USD] in Europe in the next 12 to 18 months after speaking with more than 200 B2B blockchain startups for our Enterprise Blockchain 2020 report,” Chreng-Messembourg told Crunchbase News.
Within the financial services ecosystem but outside of cryptocurrency, he sees interesting startups and good progress being made in the areas of:
- Tokenization, or the process of issuing a token on a blockchain which represents a real asset. This is a “highly active space with heavy VC investments,” said Chreng-Messembourg.
- Fund administration, an area that is under pressure to manage costs, and one where startups are using blockchain to take up the challenge; and
- Central Bank Digital Currencies (CBDC), a new form of central bank money issued on a blockchain, essentially central bank-backed digital currency.
“To date, no country has launched one, however, many central banks are running pilot programs,” Chreng-Messembourg said. “We see several advantages including lowering transaction costs, accelerating transfer times and promoting financial inclusion. A CBDC could become a game changer for most fintech blockchain solutions as it would facilitate onchain transactions.”
As adoption of blockchain gains momentum, so does venture capital investment in the technology. For example, Bloccelerate VC, a 2-year-old, Seattle-based early-stage VC firm, closed its first fund of $12 million in December to support blockchain…