A look back on 2019 and what is to come

Changes to the prosumer crypto landscape

Changes to prosumer crypto business models are a leading indicator for broader swathes of change in the industry. Prosumer businesses like crypto exchanges and wallet providers serve as the gateway for new entrants into the industry and as a result, thrive on the loyalty of a large user base. Users grow up with the platform and, as a result, these platforms need to constantly iterate and innovate new products to keep users engaged. As users become more sophisticated and active participants, they require additional services to fulfill their needs. In response to this trend, prosumer platforms are modifying their business models to become more ecosystem-like. An ecosystem is an interconnected system whereby the actions of participants affect one another. In crypto, this means leveraging the core service (trade execution, custody, financing etc…) to build other value-add services for consumers. The end goal being to drive enough liquidity to the platform to support a full suite of integrated crypto services.

Beyond Crypto: Trend toward “finance-as-a-service”

Financial institutions like Goldman Sachs and Citi are partnering with tech companies like Apple and Google to offer banking services for more retail users, taking a page out of WeChat and Alipay’s playbook. During the ‘Shaping the Future of Financial and Monetary Systems’ panel at Davos 2020, Jin Keyu — Professor of Economics at the London School of Economics — argued that financial disruption is an advanced economy view. Emerging countries like China have historically had weaker financial systems than developed countries like the United States. Therefore, integrated digital service platforms like Alibaba’s Ant Financial have filled in for rather than disrupted these missing services.

While it is unlikely that Tencent (WeChat) or Alibaba (Ant Financial) will be integrating crypto services any time soon (quite obviously due to China’s capital control restrictions), the marriage of technology companies and traditional financial firms in the US is inevitable and could lead to more innovative financial offerings targeted at millenials. As Angela Strange, General Partner at Andreesen Horowitz, believes, we might even begin to see the AWS phase of financial services come sooner than later from the likes of Uber and Airbnb. Grab, a ride-sharing company in Southeast Asia, is already headed in this direction. In Japan, consumer platforms like Rakuten and Line have long been planning down the neo-bank path. While the “finance as-a-service” trend may not mean integration of crypto into the fintech stack right away, it points to the facelift that is fast underway within the traditional financial services industry.

Whether it is staking or stablecoins, lending or Libra, DeFi or derivatives, 2020 is going to be chock full of innovation developing on the existing crypto blocks and primitives.

*More on DeFi in a follow-up post