Cryptocurrencies Gaining Traction In FinTech World
Regular readers will know that we see the quiet revolution happening outside our windows in the shape of cryptocurrencies as an important part our reporting remit. Witness the many News stories and Blogs.
Having settled a small slice of home business, with the successful £300 loan auction by litigation finance providers Harris&Co. last week, it’s time to look at the bigger picture once more.
Here’s a broad think-piece on the impact of cryptos on FinTech, from Crowdfundinsider. Given the scope of the piece and its brevity, it cannot offer a definitive view . Nevertheless, it ticks many a box.
- We offer an extended extract below, with the full piece available here.
Cryptocurrency is gaining traction with investors, businesses, and even Uncle Sam this year. Despite being around for over a decade, the global cryptocurrency market is now worth over $1 trillion. At the end of February, the 24-hour average trading volume of all cryptocurrencies across the globe reached over $93 billion. Further, the global adoption of bitcoin, the original and leading cryptocurrency, skyrocketed by 880% in 2021.
Cryptocurrency has become a major asset in global finance, and they clearly have staying power as an influential asset. On March 9, President Joe Biden signed an executive order looking into the risks and rewards of cryptocurrency, indicating the rising popularity of cryptocurrency. Further, the administration is also exploring digital currency within the U.S. which has the ability to compete with crypto assets.
It’s no surprise that digital currency is one of the priorities of the government. Adopting cryptocurrency offers several benefits to financial services such as introducing new investment opportunities and improving the remittance process. At the same time, the world continues to play catch up with decentralized finance, and cryptocurrency adoption brings plenty of challenges with it as well.
Financial services have already adopted cryptocurrency in a variety of ways. For example, we’ve seen investment apps such as Robinhood and Webull debut functionality that allows users to leverage their platform to invest in multiple cryptocurrencies.
Cryptocurrency adoption has also seeped into other areas of financial services, such as banking. For instance, Customers Bank has begun serving institutional cryptocurrency clients, offering these institutions crucial access to fiat money. The move makes Customers Bank one of the few banking institutions willing to work with such clients, including a digital currency prime brokerage, a digital asset trading platform, and a cryptocurrency meta-exchange. In another case, U.S. Bank launched a cryptocurrency custody service that allows investment managers to store private keys for digital currency, such as bitcoin, bitcoin cash, and litecoin, with support for additional cryptocurrencies anticipated over time.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £24 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
- Money&Co. has been lending for over 7 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2020/21 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.
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