Deconstructing the Digital Assets Revolution – What Financial Institutions Can Learn from the Meteoric Rise of Coinbase

Digital assets have come a long way from their nascent form as cryptocurrencies to a complete array of financial assets with increasing use cases. In fact, the year 2020 and Q1 2021 experienced a surge in retail and institutional investments in cryptocurrencies and related crypto assets in the wake of pandemic-fostered digitalization in Banking and Financial Services (BFS).

Several participants are already active in the growing crypto market. IT service providers are developing in-house solutions to help financial institutions use Blockchain-as-a-Service (BaaS) for their digital asset needs. FinTechs are at the forefront of innovating products and services but operate in an unregulated environment, posing high risks for investors. Larger investments have increased the safety, security, and accountability requirements to invest in these assets. Thus, there is an urgent need for regulatory bodies globally to bring in practical frameworks and regulations for digital asset trade at the earliest.

In this report, we analyze the rise of retail and institutional investments in digital assets, including cryptocurrencies, other crypto assets, and crypto technology. We examine different crypto financial service offerings and their impact on the BFS market. We also recommend a transformation plan for traditional banking systems through a hybrid banking model, which seamlessly integrates value-added processes and operational functions for both traditional and digital assets.