NFTs can support banks with inclusive transactions across the globe
NFTs support traditional financial institutions through smart contracts that assist cheaper, faster, secure, and inclusive transactions across the globe. Nevertheless, crypto enthusiasts continue to drop the buzzword “bankless” that if they were to have a swear jar saying “bankless”, they’d be millionaires. So, how literal is the word “bankless” when it comes to financial institutions using cryptocurrencies?
NFTs have undoubtedly challenged and changed the ideas around money and ways to use it. There are many ways in which NFTs and other blockchain-based initiatives can benefit users and financial institutions alike. These reasons include:
INTERNATIONAL TRANSACTIONS
International trading is one of the most promising use cases for how cryptocurrencies like NFTs support traditional financial institutions. The digital assets trace product information, make secure payments, facilitate original certifications, enable real-time information sharing, and optimize processes without transaction fees.
More traditional financial institutions are noticing the benefits of adding NFTs and other blockchain-based initiatives to their services. The reasons being that payment processors across borders are typically expensive and slow, and cryptocurrency speeds and cheapens the process.
CRYPTO CREDIT CARDS
To gain firsthand knowledge in the crypto sphere to better support customers, the traditional financial institution, Visa, acquired a CryptoPunk NFT for nearly $150,000. Shortly afterward, Visa made significant changes to its traditional banking system, adding cryptocurrency payment accessibility to its network. Formerly known as MCO Visa Card, the world’s first-ever crypto-linked card holds more than 50 crypto wallet partners on its network and connects to more than 70 million merchants across the globe. As a result, Visa’s crypto-linked card usage hit more than $2.5 billion in its first quarter.
Soon noticing how NFTs support traditional financial institutions, Mastercard shortly added cryptocurrency services to its network. The financial institution saw how digital assets are advantageous and an essential part of making payments across the globe.
The critical reasons for traditional banks adding crypto to their networks include gaining stronger loyalty and trust from customers by allowing them secure and faster transactions. Both banking systems state the importance of enabling customers to spend their finances how they wish. However, only select digital assets are included over compliance and security issues. The crypto tokens are mostly used due to being the most reliable and regulated.
STABLECOINS
Stablecoins maintain a stable value similar to national currencies and other reference assets but are differently held on-chain. As a result, many popular NFT platforms use these currencies to facilitate trading.
Crypto users (mainly from the United States) also use stablecoins on trading platforms for borrowing, lending, and trading purposes. Furthermore, they are helpful for businesses and households as a means of payment due to making transactions more efficient and faster than inclusive payment options.
Traditional financial institutions, like Visa and Mastercard, use reserve-backed stablecoins for efficient wholesale transactions and to manage internal liquidity. However, anyone can use them, including those who are unbanked or underserved concerning financial services.
Reserve-backed stablecoins are comparable to other money transmitting businesses, like PayPal and Venmo, allowing users to make near-instant payments and transactions within their network. But differently, without steep transaction fees. Instead, the digital assets use blockchain technology for simultaneous access, record updating, and validation across a network spread across multiple entities and locations.
DEFI PROTOCOLS
Over the past two years, decentralized finance (DeFi) protocols have grown dramatically, with billions of USD going into the ecosystem. The reason is that DeFi protocols address various issues related to the traditional finance industry. For example, the specialized autonomous programs use smart contracts for peer-to-peer lending that assist higher financial offerings.
Additionally, users can place digital assets, such as stablecoins, into a liquidity pool that will gain interest over time when being burrowed by other users. Although other cryptocurrencies, such as Bitcoin and ETH, can also be lent and borrowed to earn yield.
DeFi can snowball traditional banks into becoming more robust by removing silos associated with centralized finance. DeFi, alongside other blockchain-based ideas, allows traditional banks to implement services for easier loan access and quick transactions.
CONCLUSION
NFTs support traditional financial institutions alongside other blockchain-based technologies for numerous use cases. These digital assets open up new ways of banking across the globe like never before. The possibilities and advantages are endless.
As more NFTs support traditional financial institutions, customers notice how the banks are willing to support innovation and freedom. Now, all customers need is trust in the blockchain network for happy banking.
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