The financial landscape is constantly evolving, and at the forefront of this transformation is the burgeoning crypto and digital asset industry. As one traverses the globe in search of regions where this evolution is most profound, Australia unmistakably stands out. This nation, historically known for its mineral resources and agricultural produce, is now positioning itself as a digital assets powerhouse.
The payments industry is undergoing a major shift as digital assets, such as altcoins, stablecoins, and tokens, are becoming more widely adopted and integrated into various platforms and services. Altcoins are alternative cryptocurrencies that are derived from or inspired by Bitcoin, but offer different features and functionalities. They offer several advantages over traditional payment methods, such as faster transactions, lower fees, greater security, and global accessibility.
According to a report by FIS, a financial services technology group, the use of digital-wallet-based transactions grew globally by 7% in 2020, and it predicts that digital wallets will account for more than half of all e-commerce payments worldwide by 2024, as consumers shift from card-based to account- and QR code-based transactions. Moreover, the report estimates that the global volume of cryptocurrency payments will reach $1.3 trillion in 2024, up from $106 billion in 2019.
One of the key drivers of the adoption of digital assets in the payments industry is the emergence of stablecoins, which are digital assets that are pegged to a fiat currency or another asset to minimize price volatility. Stablecoins can facilitate cross-border payments, remittances, e-commerce, and financial inclusion, especially in regions where access to banking services is limited or costly. According to CoinMarketCap, the total market capitalization of stablecoins reached $129 billion as of August 27, 2021, up from $21 billion at the end of 2020.
Another factor that is influencing the growth of digital assets in the payments industry is the development of new technologies and platforms that enable the creation, exchange, and management of digital assets. For example, distributed ledger technology (DLT), such as blockchain, provides a secure and transparent way to record and verify transactions involving digital assets. DLT can also enable the issuance of tokenized financial instruments, such as bonds, stocks, and derivatives, that can be traded on decentralized platforms.
Furthermore, artificial intelligence (AI) and machine learning (ML) can enhance the efficiency and security of digital asset payments by providing data analysis, fraud detection, risk management, and customer service. AI and ML can also enable the generation of new forms of digital assets, such as non-fungible tokens (NFTs), which are unique and indivisible digital assets that can represent digital or physical items, such as art, music, games, or collectibles.
The adoption of digital assets in the payments industry is also creating new opportunities for small to mid-cap companies that are innovating in this space. According to a report by Deloitte UK, small to mid-cap companies with a market capitalization between $2 billion and $10 billion are expected to benefit from the increased demand for digital asset services and products2. The report also identifies some of the emerging technology trends that will shape the future of digital assets and payments, such as smart spaces, homomorphic encryption, generative AI, graph technologies, and the metaverse.