Traditional players are actively exploring ways to integrate crypto assets, currencies and solutions in their business offerings and operations.
This is something we've speculated on and discussed in great lengths over the years, to be inevitable. With the Genius Act passed, we can expect to see the convergence of crypto and mainstream finance accelerate.
Certainly, things are going to start off where it is safe, particularly with regulated stablecoins. This is because TradeFi players are generally in the business of playing safe, even though there's usually significant risks concealed by the smoke screen of regulatory efforts.
That said, even that will quickly change as many ambitious attempts will be made to roll out high-risk products to TradeFi clients. One can expect lots of high risk real world assets (RWA) endeavors and probably significant embrace of alternative yield strategies from crypto native projects.
So much of crypto will be integrated into mainstream finance.
FIS and Circle
Global financial technology leader FIS® (NYSE: FIS) has announced a new partnership with a subsidiary of Circle Internet Group, Inc. (NYSE: CRCL) (“Circle”) to give financial institutions the ability to transact in USDC, the world’s largest regulated stablecoin. This partnership launches on the heels of new U.S. stablecoin legislation that paves the way for payment stablecoins to become more integrated with traditional finance in the US. It is part of FIS’ broader strategy to support digital assets and currencies, exemplifying FIS’ strategic commitment to introduce innovative technology solutions to clients across the money lifecycle.
Working together through this novel partnership, FIS and Circle will enable U.S. financial institutions to offer their customers the option to make domestic and cross-border stablecoin payments using USDC. Issued through Circle’s regulated affiliates, USDC is a fully-reserved payment stablecoin that’s redeemable 1:1 for US dollars. — Circle Report
Fidelity National Information Services, Inc. (FIS) is a regulated $43.11B market cap financial technology company generating as much as $10.12B in revenue annually.
While it is difficult to determine how embracing stablecoins like USDC could affect its revenue, what's certain is that this convergence would significantly improve the value of its services, at least to the end users.
This is a sentiment that is shared by the Banking Solutions co-president at FIS, Jim Johnson, in his statement:
“This new partnership with Circle demonstrates FIS’ dedication to unlocking innovative financial technology that helps move money between the world’s banks, consumers and businesses. By providing our clients with direct access to USDC functionality within a regulated, and compliant framework, they in turn will be able to offer their customers greater choice in payment methods than ever before. We are helping them to embrace the latest technology to reduce the complexity and costs associated with making payments, enabling funds to flow with speed, accuracy and security throughout the money lifecycle.”
The pointers are there that we've moved into a time where money is migrating on-chain. This migration is a significant threat to mainstream finance revenues. This is why I previously said that it's difficult to speculate on the overall revenue impact.
On my hand, embracing the latest financial technology significantly improves user experience with financial operations, but on the other hand, a revenue problem is created given that for users or clients to enjoy high speed, low fee transactions, costs are abstracted away from these traditional players, hence they cannot monetize that process.
Nonetheless, it's to be expected that alternative monetization strategies will emerge. Some will involve client or user charges while most, I believe, will be based on reserve investment into government bonds.
Either way, the old ways are phasing out, integrating with crypto is the crucial next step for traditional institutions to stay competitive.