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Fintech Companies Offering Bitcoin- Good or Bad?

Fintech companies just doesn’t have that much in the profit industry lately, and it’s not hard to see why. Amidst fierce competition, catering to customers who want free stuff and the fact that traditional banks are still dominating the landscape, what’s a poor Fintech firm to do?

The answer is, believe it or not, bitcoin. Cryptocurrency was just a mere blip on the web in 2016. Heads turned when the value rose 15-fold during the next few years. Today, bitcoin is all the rage, and this might just be what Fintech companies are looking for.

Korea calls crypto addicts “zombies”. Most traders define the bitcoin bubble “worse than gambling”. But rather than chase millennials for their hard-earned money or try to undercut financial institutions, Fintech firms are now gearing towards the newest crypto-coin business.You want proof? Here are the hard facts- Revolut, primarily a money transfer business recently started offering cryptocurrency trading platforms; Circle, a social payment app has spent more than $300 million dollars on the development and creation of Poloniex, and Square Inc. has recently launched their very own Bitcoin trading platform.

One thing these companies have in common is that they don’t have anything to do with cryptocurrency in general. Even more unsettling is the fact that Square Inc.’s Jack Dorsey has launched a picture book entitled “My First Bitcoin”, and that Revolut claims to compared the world of cryptocurrency trading akin to local farms bartering “juicy” goods amongst each other in a town market.Should the public be wary of these surprising changes? As long as these investors know what they’re doing, then it should be fine. According to Recode, Coinbase posted a $1 billion-plus revenue in 2017, which is significantly greater than Square Inc.’s and Lending Club, a peer-to-peer online marketplace. The profits could also trickle down via asset-price gains and trading fees. Bitcoin could very well be the spark that helps startups gain valuable traction for cross-selling their other products on a bigger platform.

But there’s an important point that’s missing, and we don’t really know when the bubble bursts. Startups may come in too late and self-destruct. Case in point- a huge number of investors have failed in thinking that chip makers and their mining rigs could turn in a reliable profit. What’s more worrying is the fact that there could be company reputation on the line as well. Large financial institutions can use their money to pay consumers who fell victim to product misrepresentation, but not all startups have the cash or the branding they could fall back to.

Regulators have also started cracking down on the whole cryptocurrency thing as well. Mark Carney, Governor of Bank of England, calls it an anarchy; the CFTC has been issuing subpoenas on bitcoin transactions left and right; the IRS have been busy collecting user information, and the G20 seeks a global regulation.

The bottom line is, Fintech firms should weigh in the pros and cons and see if the risk is worth the investment before dipping their toes in the cryptocurrency wave. Losing means traditional banks chalk up one more win and more pressure in the competitive front.

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