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Deloitte: Banks Should Embrace Their Inevitable Digital Future

Deloitte, one of the “Big Four”, surveyed financial leaders as part of its 2021 Global Blockchain Survey, with the results suggesting a transition to digital assets is inevitable.

A total of 1,280 executives and practitioners were surveyed as part of the poll between March 242th and April 10th, with a total of 10 locations being represented: Brazil, China Mainland, Germany, Hong Kong SAR, Japan, Singapore, South Africa, the United Arab Emirates, the United Kingdom, and the United States.

According to the study, 76% of respondents believe that digital assets will “serve as a strong alternative to, or outright replacement for, fiat currencies in the next 5–10 years”, which would constitute a seismic shift in financial services.

The report also shows that 81% of all respondents agree with the notion that the technology is “broadly scalable and has achieved mainstream adoption”, with 96% of all Financial Services Industry Pioneers agreeing with the statement.

The top 5 roles that digital assets play in the organizations represented by respondents shows that custody of digital assets is the most important (45%), followed by new payment channels (42%), diversification of investments (41%), access to decentralized finance platforms, (39%), and the tokenization of assets (39%).

Top Digital Asset Adoption Challenges

While the attitude towards blockchain of the financial experts surveyed by Deloitte is positive, most of them agree that there are big challenges that still need to be overcome in order for digital assets to be accepted and used globally.

While the lack of regulatory regulation has been considered by many one of the biggest obstacles toward adoption, regulatory barriers were considered the top obstacle by 63% of the experts. Cybersecurity concerns lead the survey with 71%, while the existing financial infrastructure was in third place with 62%

Cybersecurity concerns are not surprising at a time when security breaches have taken place in several projects and networks as cryptocurrencies become increasingly attractive for malicious hackers.

When it comes to regulation, the report shows that the greatest changes that need to be met for mass adoption in the financial sector are in data security and privacy, industry-specific regulations, and internal controls/financial reporting.

Interestingly, while the Securities and Exchange Commission (SEC) has been taking several actions against cryptocurrency projects, securities laws were only cited by 37% of the participants as one of the most pressing concerns.

Is Crypto The Future of Banking?

Overall, the report shows that financial institutions see digital assets and their underlying technologies as an increasingly strategic priority that can’t be ignored, with 73% of the respondents believing their organizations would fall behind if they failed to adopt blockchain technology.

Linda Pawczuk, principal, Deloitte Consulting LLP, and global and U.S. blockchain and digital assets leader, referred to this trend by stating:

“In the last year, we’ve seen a significant shift in how the global financial ecosystem is thinking about new business models fueled by digital assets, and how this is playing a meaningful role in financial infrastructure. The Deloitte 2021 ‘Global Blockchain Survey’ shows that the foundation of banking has been fundamentally outlived and financial services industry players must redefine themselves and find innovative ways to create economic growth in the future of money.”

With the adoption of blockchain technology and digital assets growing on a daily basis, decentralized finance has become a concern for traditional finance institutions.

Failing to reinvent themselves by offering services for the acquisition, trade, and use of cryptocurrencies could be catastrophic for organizations that historically haven’t experienced strong competition.

An even greater risk to legacy financial institutions is DeFi.

DeFi has created an alternative interest rate setting system by offering staking rewards for major tokens. While central banks are zero bound, DeFi allows investors to gain 10% per year on their holdings, or more.

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