Experts Discuss Key Considerations for Traditional Finance Firms Venturing into Digital Assets
Summary:
As digital assets surge in popularity, financial institutions are advised to consider adding them to their offerings. The Cointelegraph Innovation Circle features 11 experts discussing the necessary considerations for this move, emphasizing robust risk management, the unique verification process of blockchain, stringent cybersecurity norms, the importance of educating clients about digital assets, care in choosing technology partners, focusing on capital preservation, identifying asset classes, preparing for asset volatility, and considering hybrid portfolios. The article underlines staying up-to-date with evolving Web3 regulation is paramount in this transition.
As the popularity and acceptance of digital assets surge amongst investors, conventional finance companies are contemplating broadening their scope to include digital assets in their offerings and portfolios. In such a competitive industry, financial entities cannot afford to remain stagnant, therefore turning towards the potential of digital assets opens up a gateway to an eager, expanding clientele. Moreover, the integration of digital assets can enhance the diversity of a conventional portfolio and can serve as a buffer against market dips. However, there is room for mishap if finance firms do not adequately brace themselves for the unique prospects, challenges, and dangers associated with digital assets. Below, 11 members of Cointelegraph Innovation Circle provide necessary steps a financial organization must take into account if entertaining the idea of digital assets.
Firstly, robust risk management is crucial in an industry characterized by high volatility and unique regulatory landscapes, like that of digital assets. It necessitates a comprehensive understanding of the asset's technology, market behavior, and potential legal consequences. - Tomer Warschauer Nuni, Kryptomon
Unlike conventional assets, the proof of ownership and transfers are different in blockchains. For digital assets, record-keeping is continuously updated and verified on the blockchain, and each transaction is recorded on the chain itself. – Zain Jaffer, Zain Ventures
The security of digital assets depends significantly on stringent cybersecurity protocols. The past year has proven the importance of keys in possessing your assets. It's prudent for institutions to practice due diligence regarding their staff and implement strict cybersecurity procedures. – Timothy Enneking, Digital Capital Management
It’s equally important for institutions to understand and align with the crypto community's core values and practices, underpinned by decentralization and transparency. – Arvin Khamseh, SOLDOUT NFTs
Educating clients on digital assets is essential as most traditional clients may have inhibitions about, or may not be familiar with cryptocurrencies. User-centric promotional content, informative articles, explanations on the site, and illustrative videos in client-appropriate terminology can make a significant difference. – Sheraz Ahmed, STORM Partners
As traditional companies venture into the digital economy, selecting partners and technology is a pre-requisite. They should carefully pick partners with extensive experience and reliable solutions. – Oleksandr Lutskevych, CEX.IO
With the introduction of digital assets such as cryptocurrencies, a crucial point to note for traditional financial institutions is to ensure no losses result from avoidable scenarios, underlining the importance of capital preservation. – Abhishek Singh, Acknoledger
Institutions need to clearly identify the asset classes they are investing in and disseminate this knowledge to their audience. The emerging market presents an array of digital assets such as cryptocurrencies, tokens, nonfungible tokens, and several others. – Megan Nyvold, BingX
Traditional financial institutions must be prepared for the volatile nature of digital assets, particularly cryptocurrencies' attribute of wide price fluctuations. Hence, stringent risk management practices are indispensable. – Anthony Georgiades, Pastel Network
Traditional finance companies should contemplate creating hybrid portfolios to balance between traditional and emerging investments. There are dual benefits to this approach: it caters to evolving client interests and leverages institutional expertise, but also mandates a strict risk assessment and regulatory adherence. – Vinita Rathi, Systango
Lastly, being aware of and preparing for evolving Web3 regulations is paramount for traditional finance companies. They should collaborate with blockchain compliance experts to keep abreast of the current legal mandates and anticipate future changes. – Wolfgang Rückerl, ENT Technologies AG
This piece was published by the Cointelegraph Innovation Circle, a network of senior professionals and thought leaders championing the future by fostering connections and collaboration in the blockchain industry. The views expressed are not necessarily in line with those of Cointelegraph.
Published At
9/28/2023 4:00:00 PM
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