Traditional finance (TradFi) can play a crucial role in the global adoption of cryptocurrencies and digital assets.
This is the belief of Sergey Nazarov, co-founder of Chainlink, who has expressed his confidence that this sector could become a catalyst for the massive entry of users into the crypto space.
During a recent interview with The Defiant, Nazarov shared his vision on how the traditional finance sector or TradFi can play a crucial role in bringing the next billion new users into the cryptocurrency ecosystem.
The convergence of TradFi and cryptocurrencies
According to Nazarov, traditional financial institutions such as large banks and asset managers have a key role to play in integrating new users into the world of cryptocurrencies.
During the interview, the Chainlink co-founder mentioned that many of these institutions already have millions of users who trust them to manage their savings and assets, so there is a huge possibility of these users entering the crypto world, if these institutions adopt cryptocurrency-based solutions and services. Nazarov stressed that crypto assets could become more accessible to millions of people through their existing bank accounts.
The Chainlink co-founder also explained that integrating crypto assets with traditional services could facilitate a smoother transition for users towards using this class of digital assets, as TradFi users would not realize that they are using blockchain technology to carry out their transactions.
Despite the innovation of blockchain technology in the financial sector, and the revolution that the decentralized finance (DeFi) ecosystem has brought about, Nazarov acknowledged that this sector still needs significant improvements, especially when it comes to private key management. Therefore, he believes that integrating blockchain technology into TradFi platforms could allow users to benefit from the advantages of cryptocurrencies without having to fully understand the underlying technical aspects of using the blockchain.
The potential of capital markets to drive crypto adoption
On the other hand, Nazarov stressed that TradFi's impact on cryptocurrency adoption is not limited to retail consumers only. He mentioned that capital market participants could benefit from blockchain technology and significantly accelerate cryptocurrency adoption.
While he acknowledged that he is not sure which of these TradFi sectors will bring more new users into the crypto world, he said that as traditional financial institutions provide crypto-related products and services, the participation of institutional investors is likely to increase. This could result in significant growth in the total value of digital assets and increased market participation and adoption, he explained.
“…And I don’t know which of those two groups will come from more or a greater percentage of those next billion users, but I’m pretty sure that a significant percentage, a double-digit percentage, will come from both.”, said Nazarov.
User experience as a decisive factor for mass adoption
As mentioned, despite the opportunities presented by the DeFi sector, Nazarov highlighted the need to improve the user experience in the cryptocurrency space, making it more flexible and fluid, in order to attract the next wave of new users.
In the case of TradFi, institutions that are part of this sector have the advantage of having an established infrastructure and a solid customer base, who are familiar with said infrastructures. Therefore, Nazarov foresees that if these institutions manage to integrate cryptocurrency services effectively, they could facilitate the entry of new users into the digital ecosystem.
In short, Nazarov’s growth and expansion prospects for the crypto industry lie in the ability of traditional banks and financial institutions to integrate cryptocurrency products and services, and enable more people to become familiar with these digital assets through their platforms. According to Nazarov, the combination of increased access, trust in financial institutions, and improved user experience could be the key to unlocking access to one billion new users in the crypto space.
