The cryptocurrency industry is struggling to improve its reputation, according to new research published today by Coincover, the blockchain protection company. The report – Securing the Future of Cryptocurrencies, based on a survey of 16,316 people in nine countries – finds that the two most significant barriers to mass crypto adoption are volatility and security risks.
The research, which is also based on an extensive literature review, and interviews with market experts, analyses the reasons for crypto’s current reputation, questions whether this is justified, and advises on confidence-building measures to help the industry move forward.
The report argues for the creation of voluntary industry standards, alongside mechanisms for users to identify providers that adhere to these standards, encouraging an environment whereby consumers move to these recognised providers.
Cryptocurrencies have vast potential for growth:
- Ownership is on the rise: 17% of those surveyed currently own cryptocurrencies while 30% say they are likely to invest in cryptocurrencies in the next 12 months. Bitcoin is the most popular (46%), with NFT’s in second (18%), ahead of Ethereum (17%).
- Attitudes and curiosity: More than half (55%) of respondents are at least crypto-curious, with 11% stating they are active or committed (highly invested in the market).
- Positive investment returns: 50% of respondents are positive about their financial returns from crypto holdings, compared to 20% who are dissatisfied with their returns.
However, there are obstacles to overcome:
- Cynicism: 19% of consumers are cynical about crypto while 25% say they are closed to cryptocurrencies entirely.
- Trust issues: Crypto exchanges are the least trusted financial services provider among non-crypto users with 30% saying they don’t trust them at all.
- Technology concerns: When asked about their thoughts on a range of technologies, crypto concerns consumers the most, with 30% worried about it – ahead of artificial intelligence (AI) at 25%.
- FTX scars: The collapse of FTX damaged the industry’s reputation, with 20% of people now more cynical towards the entire market because of the scandal and 16% more cautious about which providers they choose.
- Criminal associations: The research found that crypto is more likely to be perceived as an enabler of criminal enterprise, financial fraud, and corporate crime over potential benefits like financial innovation and privacy.
- Barriers to investment: Across both users and non-users, the two biggest barriers to investment are price volatility and security concerns. For users, the third biggest barrier to entry is losing keys/access while for non-users it is complexity.
- Security hurdles: When asked about threats, 52% of people are most concerned about fraud, followed closely by theft – including hacking – at 51%. Only 54% of people who own crypto assets are satisfied with their providers’ commitment to security.
David Janczewski, CEO and co-founder at Coincover, says: “Crypto’s potential is huge, but our research makes clear that the industry must take steps to address consumer concerns. Many still perceive cryptocurrency as a mysterious technology and the industry must show that it is doing everything it can to protect investors, build consumer confidence, and provide stronger foundations for the future.”
The report outlines how the industry can build confidence:
- Create industry standards: With regulation moving slowly, the industry must now develop clear standards and codes of conduct that will help to protect investors and prevent further reputational damage.
- Provide protection to address concerns: A need to address security concerns by investing in robust blockchain protection and educating consumers about the risks of crypto investing, and what can be done to limit exposure to these risks.
- Tackle complexity: Efforts should be made to simplify crypto investing by providing clear and concise information.
Charles Guillemet, Chief Technology Officer at Ledger says: “The crypto revolution requires two crucial ingredients to go mainstream. The first is scalable infrastructures, just as the Internet needed fast broadband to spread to billions of people. The second is security. As more people store their money, identity, or data into blockchains, they shouldn’t risk losing them. It’s as simple as that. Only once these requirements are met will the crypto revolution be able to spread to hundreds of millions.”
Janczewski, says: “The Industry can do more to protect users and reduce risk. We must develop clear standards and adopt best working practice principles.. By so doing, we can reduce security risks, prevent reputational damage, and help to build confidence among users. Organisations which adhere to standards will become easily identifiable, and force out untrustworthy entities.”
Ian Taylor, Head of Crypto and Digital Assets at KPMG and Board Advisor at CryptoUK, adds: “Self-regulation is something that we’ve been working on as a global industry for a long time to support government entities, as well as international standard setters that develop the frameworks that get passed down to individual competent authorities. In a new industry, that’s the first steppingstone to providing codes of conduct for members, and a set of rules that protects against harm to clients.”