The barriers to crypto adoption
In the ever-changing world of cryptocurrencies, two words can be used to describe its past and future: trust and confidence. As we navigate the uncharted territory of this transformative technology, recent events have shaken trust and confidence in crypto. But amidst the challenges lies an opportunity for crypto to rise, rebuild and redefine its future.
The quest for trust and confidence
Confidence over trust
The survey’s findings are crystal clear, revealing a significant lack of trust in crypto from consumers. Notably, crypto exchanges were viewed as the least trusted among all financial services providers. A report published during the Global Financial Crisis (GFC) raised a critical question: “How to restore lost trust?”. It identified two dimensions of trust in institutions. Structural assurance, tied to robust regulation legal clarity, and situational normality, which relates to how businesses and professionals conduct themselves. The survey data shows the recent FTX collapse underscores how both dimensions of trust have been shaken and show the need for proper governance standards in the crypto world.
While trust in crypto has undeniably been shaken, the data shows that the key obstacles to investment in the crypto market are price volatility and security concerns, issues that squarely belong to the realm of confidence rather than trust.
In essence, trust relies on faith, while confidence is rooted in certainty. It's not just about inspiring trust but instilling confidence in the reliability and security of the crypto space. As we move forward in this ever-evolving landscape, the journey is about fostering a future where cryptocurrencies are synonymous with assurance, credibility, and the limitless possibilities that they hold.
Ambivalence and Trust Dilemmas
Interestingly, respondents showed mixed feelings when it came to trust. A large portion of respondents said they were “neither” when asked if they trusted or distrusted a given service provider. Notable though, among the traditional financial service providers, stockbrokers and mortgage brokers came out as the least trusted. This implies that while having a high level of trust is important, it’s not the only requirement for carrying out transactions and operations within the cryptocurrency industry. Instead, what holds the real power in driving the cryptocurrency market toward broader acceptance and success is confidence.
In the words of Adam Jackson, Director of Policy at Innovate Finance, confidence that the other party “will do what they say they will,” is what is required to conduct business. “That applies whether you’re a new technology or asset class or not. People should ask questions, and companies should be able to answer them.”
Gone are the days of solely relying on interpersonal relationships between customers and shopkeepers, as the new digital era replaces this with online recommendations and reviews. The survey indicates that the number of people who distrust crypto service providers is similar among both active crypto investors and non-investors. However, there are differences in perspective between these groups. Crypto investors worry about losing access to their accounts or private keys, while non-investors find the complexity of crypto a barrier. These concerns, though different, are both related to confidence in the technology.
Addressing the inherent volatility in the crypto market can be challenging, but security concerns can be turned into opportunities for bolstering confidence within the crypto ecosystem. To enhance consumer confidence, market participants must offer strong protection, safety measures, and accessible solutions for resolving issues.
Consumers have identified asset protection through insurance and robust cybersecurity as top priorities for increasing their confidence in cryptocurrencies. These measures, along with transaction monitoring and advanced hardware wallets, play a crucial role in mitigating security risks. Fraud and hacking are among consumers' primary security concerns, making security a pivotal factor for the future of crypto.
Charles Guillemet, Chief Technology Officer at Ledger emphasises the importance of improved security for the crypto industry.
Irrational fears and headlines
It’s no revelation to say the media landscape has subjected crypto to some unfair scrutiny. Understandably, there are some risks involved in crypto, such as the staggering $3.8 billion lost to hacking last year. As a result, there is a largely negative stance from the media on crypto.
Scare-mongering stories in the media have created negative narratives, with our research supporting this observation. Nearly 50% of respondents perceive the media on political climate and technology as positive. Disappointingly, this figure declines to 35% when discussing coverage of the crypto industry.
However, this perception does differ between countries and correlates to their regulatory stance. For example, the respondents in the UAE and Singapore, where regulation is voted at its most suitable, consumers generally had a more positive attitude toward crypto in the media.
Understanding irrational fears
The criminal exploitation of new technologies plays a large part in how people view these technologies. Adam Jackson, Director of Policy at Innovate Finance says:
As Generative AI like ChatGPT gains momentum, concerns about potential financial scams and fraud tied to this tech are on the rise. In the tech adoption journey, you've got your innovators and early adopters, leading the charge, while the late majority and laggards cautiously follow. The pace of tech adoption is driven by these distinct user groups and their attitudes.
Surprisingly, when asked about their tech concerns, people worry more about cryptocurrencies than AI. This might seem odd, but it's because blockchain is transparent (like a glass box), while AI remains a mystery (a black box).
History shows that new technologies, like telephone banking or mobile apps, face resistance initially, but eventually win consumer trust. This behaviour may not always seem rational, as seen with crypto investments. People are warned about potential losses, yet many still report positive returns.
Consumer concerns span various technologies, with a mix of caution and desire for freedom in financial choices.
Complexity avoidance, the mystery of crypto
Crypto's complexity challenges our understanding of money's creation and the roles of traditional banks. JK Galbraith's words echo the sentiment: money's creation seems simple, but it's mysteriously complex, particularly in crypto, which lacks physical representation.
Crypto's intricate technology, as evidenced by the survey, confuses newcomers. The lack of clear information is a major barrier, with 30% of non-users and 23% of users citing complexity.
This complexity is a significant hurdle, as people are reluctant to invest in what they don't understand. To achieve mainstream adoption, crypto must become as seamless as AI has become with ChatGPT.
Download our 'Securing the Future of Cryptocurrencies' report to find out more about the future of crypto adoption.