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The Paradox of Fintech Decentralization

The disruption of the financial sector has been driven by the emergence of institutions offering decentralized solutions. The facilities and better costs brought by the new model of fintechs have taken money out of banks and big funds, places where historically there was no chance of them leaving.

Digital banks have cut fees and put their services inside cell phones, in the palm of people’s hands, saving users from endless queues. The innovative model has won over millions of customers worldwide in the last five years. Now they don’t intend to go back to the “benches”.

Despite the market slowdown in 2022, the cryptoactive companies should not lag behind. The tendency is for them to become an increasingly important part of people’s asset portfolio, especially for the younger generations.

Brazil, in fact, is one of the five largest cryptocurrency markets in the world. The number of people who invest in some kind of digital asset, such as tokens and cryptocurrencies, already exceeds 10 million in the country: more than double the number of CPFs registered at B3.

The challenge for fintechs

Now the challenge of these virtual companies is changing. Already consolidated as institutions, they need to maintain growth (after the customer acquisition boom ) and face the bottlenecks of the lack of regulation of the sector.

On the one hand, decentralized financial transactions grow because of the advantages to the consumer; on the other hand, new frontiers related to decentralization arise with Web 3.0, since the origin of the assets still corresponds to the centralized universe. Despite the partial migration of wealth, the banks still hold most of it.

Thus, there are greater technical and regulatory challenges than simply pleasing the customer. This is the paradox of the new times: while decentralization promotes the democratization of financial services, it still depends on law to evolve.

The big banks have been unable and uninterested in putting technology to the service of the people, but they still own the source of the money. This inconsistency should slow down the fluidity of the market until the legalization of the official means, such as the Central Bank, occurs.

It will certainly be more difficult for traditional financial entities to advance digital services with the same speed, autonomy, and innovation as fintechs. On the other hand, it will take time for these fintechs to reach the same financial volume as banks.

The future lies in developing products and solutions for customers in the innovation environment. In this sense, crypto-activities should go further: they will be increasingly recurring forms of payment.

Although it is a more challenging time for fintechs, what drives the market will not change. Everyone wants freedom of choice and competitive conditions for investing, getting credit, or just saving money.

Therefore, the future has only one path: decentralize everything and give more power to the people, but for this, it is necessary to regulate a range of possibilities that arise every day permeated by technology.

* BlockBR is a fintech specialized in tokenization and investments in digital assets that was born with the culture and mindset of Web 3.0

Source: Moneytimes

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