The cryptocurrency industry is struggling to improve its reputation, according to new research published by Coincover, the blockchain protection company. The report – ‘Securing the Future of Cryptocurrencies’ is based on a survey of 16,316 people in nine countries. It finds that the two most significant barriers to mass crypto adoption are volatility and security risks.
The research, which is also based on an extensive literature review, and interviews with market experts, analyses the reasons for crypto’s current reputation. It questions whether this is justified, and advises on confidence-building measures to help the crypto industry move forward.
The report argues for the creation of voluntary industry standards. This is in addition to mechanisms for users to identify providers that adhere to these standards. It encourages an environment whereby consumers move to these recognised providers.
Cryptocurrencies have vast potential for growth
Ownership is on the rise. Seventeen per cent of those surveyed currently own cryptocurrencies while 30 per cent say they are likely to invest in cryptocurrencies in the next 12 months. Bitcoin is the most popular (46 per cent), with NFT’s in second (18 per cent), ahead of Ethereum (17 per cent).
Additionally, more than half (55 per cent) of respondents are at least crypto-curious, with 11 per cent stating they are active or committed (highly invested in the market).
In regard to positive investment returns, 50 per cent of respondents are positive about their financial returns from crypto holdings. This is compared to 20 per cent who are dissatisfied with their returns.
Obstacles to overcome
Nineteen per cent of consumers are cynical about crypto while 25 per cent say they are closed to cryptocurrencies entirely. Furthermore, crypto exchanges are the least trusted financial services provider among non-crypto users. In fact, thirty per cent say they don’t trust them at all.
When asked about their thoughts on a range of technologies, crypto concerns consumers the most, with 30 per cent worried about it – ahead of artificial intelligence (AI) at 25 per cent.
The collapse of FTX damaged the industry’s reputation. Twenty per cent of people now more cynical towards the entire market because of the scandal. A further16 per cent are more cautious about which providers they choose.
The Coincover research found that crypto is more likely to be perceived as an enabler of criminal enterprise, financial fraud, and corporate crime over potential benefits like financial innovation and privacy. When asked about threats, 52 per cent of people are most concerned about fraud, followed closely by theft – including hacking – at 51 per cent. Only 54 per cent of people who own crypto assets are satisfied with their providers’ commitment to security.
It also has barriers to investment. Across both users and non-users, the two biggest barriers to investment are price volatility and security concerns. For users, the third biggest barrier to entry is losing keys/access while for non-users it is complexity.
David Janczewski, CEO and co-founder at Coincover, says: “Crypto’s potential is huge, but our research makes clear that the industry must take steps to address consumer concerns. Many still perceive cryptocurrency as a mysterious technology and the industry must show that it is doing everything it can to protect investors, build consumer confidence, and provide stronger foundations for the future.”
Industry standards must be created. With regulation moving slowly, the industry must now develop clear standards and codes of conduct that will help to protect investors and prevent further reputational damage.
There is also a need to address security concerns. This can be done by investing in robust blockchain protection. Additionally, it is important to educate consumers about the risks of crypto investing, and what can be done to limit exposure to these risks.
Furthermore, efforts should be made to simplify crypto investing by providing clear and concise information.
Accelerating the revolution
Charles Guillemet, chief technology officer at Ledger says: “The crypto revolution requires two crucial ingredients to go mainstream. The first is scalable infrastructures, just as the Internet needed fast broadband to spread to billions of people. The second is security. As more people store their money, identity, or data into blockchains, they shouldn’t risk losing them. It’s as simple as that. Only once these requirements are met will the crypto revolution be able to spread to hundreds of millions.”
Janczewski, says: “The Industry can do more to protect users and reduce risk. We must develop clear standards and adopt best working practice principles. By so doing, we can reduce security risks, prevent reputational damage, and help to build confidence among users. Organisations which adhere to standards will become easily identifiable, and force out untrustworthy entities.”
Ian Taylor, head of crypto and digital assets at KPMG and board advisor at CryptoUK, adds: “Self-regulation is something that we’ve been working on as a global industry for a long time to support government entities. This is as well as international standard setters. These develop the frameworks that get passed down to individual competent authorities. In a new industry, that’s the first steppingstone to providing codes of conduct for members, and a set of rules that protects against harm to clients.”