Regulation, User Trust, and Tech Constraints Stand in the Way of Mass Crypto (Banking) Adoption, Says Brighty’s CTO Nikolay Denisenko
In an interview with Cryptonews, Nikolay Denisenko, the co-founder and CTO of mobile digital finance Brighty app and former Lead Backend Engineer at neobank Revolut, spoke of the major challenges crypto companies face when moving into neobanking.
He further discussed how neobanks can utilize DeFi to offer enhanced services, opined that the role of neobanks will expand with market evolution, and argued that these novel institutions will push traditional banks to step up their game.
This is what he had to say.
Key Challenges to Overcome
Widespread crypto banking adoption depends on industry players and regulators together overcoming challenges tied to regulation, trust, and tech limitations, Denisenko said.
There are several major challenges when transitioning from traditional banking to neobanking, Denisenko told Cryptonews.com. These also present barriers to crypto adoption.
First, crypto companies are facing regulatory hurdles. The banking industry is heavily regulated, but the digital space needs a “robust regulatory framework” to become a part of the global financial system.
Then, there is a lack of widespread understanding and trust – many individuals still see crypto as risky or speculative investments.
Gaining customer trust is especially difficult with the “stiff” competition from established financial institutions.
Offering first-rate security for the new tech-based products is key, Denisenko argued. Companies must invest in measures such as multi-factor authentication, encryption, and audits.
Lastly, fintechs and neobanks must build a solid technological infrastructure, aiming to create “scalable and reliable systems to support real-time transactions,” the CTO said.
However, per Denisenko,
“Considering the current regulatory landscape, the forecast for crypto adoption and fintech growth in Europe is generally optimistic.”
This is largely due to the EU’s efforts to provide “a clear and harmonized framework” with its Markets in Crypto-Assets (MiCA) regulation.
Web3 Tech Can Bring Secure, Efficient, and Transparent Financial Services
“Neobanks and fintechs can leverage it to create more secure, efficient, and transparent financial services that empower users and give them greater control over their assets.”
As decentralized finance (DeFi) encompasses a wide range of financial products and services – including lending platforms, decentralized exchanges (DEXs), and yield farming – its integration enables companies to offer customers “more diverse and sophisticated financial solutions.”
Denisenko argued that,
“As crypto and DeFi grow, they can help democratize finance.”
Current State of Neobanking in the EU
EU neobanking, Denisenko argued, is characterized by “significant growth and innovation.”
There has been “a surge” in the number of neobanks and established financial institutions launching their digital banking offerings.
Denisenko said that,
“This expansion highlights the global potential of neobanking services and the ability of European neobanks to scale and compete in international markets.”
It is likely that the role of neobanks will only increase with the market evolution, as customers search for more diverse, convenient, and cost-effective banking solutions.
That said, there are some gaps for EU neobanks to fill in order to reach long-term success:
- better integration of fiat and crypto services to provide a one-stop solution;
- offering advanced DeFi products to attract a broader user base;
- implementing proof-of-reserves to help build user trust;
- simplifying the user experience, lowering fees, and offering educational resources to improve accessibility.
The Future of the Industry
In the next ten years, Denisenko opined, as regulations like MiCA mature and technological advances make crypto usage simpler, crypto banking is likely to become more mainstream.
Denisenko said that,
“Neobanks and fintechs focusing on DeFi and crypto will keep gaining market share, pushing traditional banks to step up their game. We might even see the rise of "DeFi banks" fully embracing blockchain tech and cryptocurrencies.”
That said, mass adoption still depends on industry players, regulators, and policymakers working together to overcome the above-mentioned challenges.
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