In the last six months, the crypto economy experienced
significant milestones, fueling the record surge of the digital asset; and the
industry is expected to preserve momentum even after rallies come to an
end. Although we only just entered the second quarter of the year, we
have seen a number of noteworthy developments in the field of cryptocurrencies,
some of which are highlighted below.
· On
April 20, 2021, Venmo announced
it is adding crypto support to its platform, joining the long list of companies
that recently began recognizing and accepting virtual currencies.
· As
announced in the first week of April 2021, Square Inc., Fidelity and Coinbase are
forming The Crypto
Council for Innovation, with a mission to serve as the
industry’s voice and “communicate cryptocurrencies’ benefits to policymakers,
regulators and people around the world”.
· During
that same week, Goldman
Sachs announced it is making Bitcoin funds available to its
wealthy clients, speeding up the institutional adoption of the virtual
currency. The investment bank will soon be helping wealthy clients invest in
cryptocurrency, through a new Digital Assets Group within its private wealth
management division.
· On March
30, 2021, Paypal announced
it has started allowing U.S. consumers to use their cryptocurrency holdings to
pay at millions of its online merchants internationally. As a result, customers
who hold virtual currencies in PayPal digital wallets will now be able to use
their assets at checkout to make purchases. This check-out feature builds on
PayPal’s offering to buy, sell and hold cryptocurrencies, which was only
launched in October of last year.
· A few
days prior to PayPal’s news, Tesla
Inc. announced that the company would now start accepting
Bitcoin as a form of payment. While PayPal’s technology settles the
transactions in fiat currency, limiting any exposure for merchants, Tesla will
be holding the Bitcoin used as payment. Despite high price volatility and
associated solvency risks, the tech-billionaire, Elon Musk, has embraced
Bitcoin and other cryptocurrencies more than any other major CEO and this type
of operating model is not expected to be widely adopted by many. Tesla also
announced it invested $1.5 billion in Bitcoin to “further diversify and
maximize” the return on its cash in a Securities and Exchange Commission (SEC)
filing earlier in February 2021. As an influential business leader, Elon
Musk’s constant support for Bitcoin and other cryptocurrencies, often through
Twitter, has been a significant contributor to cryptocurrencies' all-time high
prices.
· In late
March 2021, Visa announced
it will allow the use of cryptocurrency USD coin, a stable cryptocurrency whose
value is pegged directly to the US dollar, to settle transactions on its
payment network. As part of a pilot program, the payments network will work
with the Crypto.com platform and Anchorage, a digital-asset bank.
· On
March 18, 2021, Bank
of New York Mellon, one of the largest custody banks in the
world, invested in cryptocurrency custody Fireblocks, a market leader in providing
secure technology to support digital asset services. Earlier this year, BNY
Mellon said it would offer Bitcoin and other crypto custody services to its
clients. BNY Mellon plans to use Fireblock’s technology towards its plan to
serve as a custodian for digital assets on behalf of its institutional
investors.
· Fireblocks
was also the custodian of Facebook’s rebranded
digital asset, Diem,
which is also expected to launch in 2021. Facebook’s digital currency project,
previously known as Libra, has been in the works since 2019 and was offset by
several roadblocks from regulators, supervisors, policymakers as well as
central banks, and governments from the wider G8. Despite addressing the
regulatory challenges, concerns regarding a social media giant being at the
epicenter of the global financial system are still well-grounded.
· Morgan
Stanley becomes the first big U.S. bank to offer access to Bitcoin
funds for their wealthy clients, announced on March 17, 2021. The investment
bank will offer access to three funds that enable ownership of Bitcoin for
investors with an “aggressive risk tolerance”.
· During
the same week, JPMorgan announced
it is exploring Bitcoin and cryptocurrency clearinghouse options, emphasizing
the need for a middleman to sit between over-the-counter (OTC) desks and
traders to create market liquidity and guarantee trade enforcement.
· Square
Inc., an American digital payments company, is another company after
Tesla, which began to embrace the world’s biggest cryptocurrency, Bitcoin, with
its own investments. Square announced in February 2021, that it is investing
$170 million more in Bitcoin, in addition to a $50 million Bitcoin purchase in
October 2020.
· As of
February 18, 2021, the world’s first
Bitcoin exchange-traded fund (ETF) in North America was
approved and launched. The ETF is owned by Purpose Investments, a Canadian
investment firm, and is traded on Toronto Stock Exchange (TSX) after obtaining
approval from Canada’s securities regulator.
· In
January 2021, Blackrock added
Bitcoin futures for two of its funds as a potential investment, according to
filings with the SEC. The two funds are BlackRock Strategic Income
Opportunities and BlackRock Global Allocation Fund.
· Popular
trading applications such as Revolut and Robinhood also
had Bitcoin and other popular cryptocurrencies available to their users for the
last few years, since 2017 and 2018, respectively; yet have experienced a spike
in their cryptocurrency trading volumes and new traders on their platforms.
Robinhood said its cryptocurrency service has added 6 million funded accounts
in the first two months of 2021 only, when its total customer count was 13
million users in May 2020.
Overall,
the emerging crypto market is not only attracting retail investors, but also
traditional financial institutions and large corporations that are looking to
profit from the emerging trend of digital assets. Accordingly, we are
experiencing the greatest appreciation of cryptocurrency in history and it is
becoming clear the field is here to stay.
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