The kids are alright

It’s a whole new financial world out there.

As younger generations grow up, long-standing establishments that deal in traditional payment methods are finding themselves struggling to keep up.

European banks and businesses are having trouble addressing the interests of millennials and Generation Z, whose buying power is approaching an all-time high. Surveys consistently show the region’s youngest demographics distrust traditional commercial institutions.

Combined with Europe’s increasingly contentious political landscape, it’s been enough for many to make cryptocurrency their main investment vehicle despite the recent bear market.

All signs point to crypto’s future riding on the continued trust of young investors, as well as pragmatic regulation from the political bodies that govern them.

Looking at things realistically, digital currency is still in its infancy, and there’s a long road ahead. Crypto only represents less than 1% of the global GDP, and 2018 was perhaps its most tumultuous year yet. But there’s a light at the end of the tunnel.

Young, savvy investors are still getting into the crypto market, and adoption is on an upswing. How can we raise those adoption rates even further? This might come as a surprise to some crypto supporters, but here it is: REGULATION.

Dirty word

While some crypto enthusiasts might consider it a dirty word, smart, common-sense regulations and decentralised digital currency can (and should) happily coexist. The good news is that history is on our side. For the most part, regulation has driven adoption. If you don’t believe me, this brief history of internet regulation is pretty eye-opening.

The landscape of the information superhighway changed dramatically after the bipartisan Telecommunications Act of 1996, thanks to new laws that promoted lawful competition. As the report states: “Today, we regard the convergence of telephones, television, and the internet as a fact of life. In 1996, it was considered a futuristic proposition.”

It’s also been shown again and again that regulations drive economic growth. With the gloomy forecast for Europe’s GDP this year, driving crypto adoption through useful regulation could help give the economy the boost it needs.

So where do those smartphone-loving, hashtag-using, tech-savvy younger generations fit into this picture? Well, as I mentioned before, millennials and Gen Z are losing trust in traditional institutions. Many of them don’t think that companies act ethically or in the consumer’s best interests.

For many millennials, cryptocurrency is their first exposure to investing, and they still trust it more than stock exchanges. And then there’s the technology behind blockchain, which is naturally appealing to a generation who grew up with a mini-computer in their hands. Just like how millennials grew up with the internet, members of Generation Z will grow up with blockchain; it’s just another form of ubiquitous tech to them. And this particular technology happens to appeal to their curious, socially conscious, entrepreneurial sensibilities.

These young, savvy investors are really making waves in Europe, which has been a leader in the virtual currency space since the European Central Bank’s “Virtual Currency Schemes” report of 2012.

Inherently unstable

That report, one of the first of its kind, found that virtual currencies “do not pose a risk to price stability” and, though “inherently unstable”, “cannot jeopardise financial stability”. Interestingly, the report also noted that a lack of regulation could expose users to “credit, liquidity, operational, and legal risks”.

Thankfully, progress is being made on that front. The European Council and European Parliament have come together on the 5th AML Directive, which comes into effect in January 2020. This anti-money laundering law specifically calls out cryptocurrency, providing a legal definition and applying the same regulations as other “obliged entities”.

Whatever challenges arise, it’s clear that millennials and Generation Z are poised to play a pivotal role in shaping the future of crypto-powered commerce. Between these important regulations and the millions of savvy young people ready to put them into practice, new financial paradigms will blossom and replace those put in place by the generations that preceded them. Europe’s crypto future is looking very bright indeed, and I’m immensely excited to see what happens next.

Jovan Gavrilovic,

OKCoin General Manager