Author: Mr. Charalambos Papasavvas
Advocate – Legal Consultant
Managing Partner of PAPASAVVAS & LISKAVIDOU LLC
Founder of RELOTECH EXPERTS
Founder of NEOCOURSES INNOVATION CENTER
Introduction
Financial Technology (FinTech) companies have been at the forefront of advancing blockchain and Distributed Ledger Technology (DLT) across various industries and financial services, paving the way for crypto assets to become central in the digital assets landscape. FinTech’s innovation has triggered transformative shifts in sectors like micropayments, remittances, lending, insurance, crowdfunding, and asset management. This shift, validated by the rise of crypto assets (Mehdiabadi et al., 2020), has been driven by mobile technology, cloud computing, big data analytics, and blockchain, creating faster, cheaper, and more transparent financial services that are accessible to anyone with internet access, marking a significant departure from traditional banking.
Mobile Adoption and E-Payments The mobile industry has seen exponential growth over the last decade, with digital connectivity reaching new heights as innovations and new market entrants have emerged. This growth has resulted in better network coverage, faster internet speeds, and more affordable mobile devices, allowing previously unbanked individuals and institutions to
explore new financial alternatives (ADB, 2016). According to the GSM Association, which represents over 750 mobile providers globally, 2019 marked a pivotal year in the digital
landscape as mobile money users surpassed one billion, reflecting how digital transactions are becoming part of daily life worldwide (GSMA, 2019).
Digital Identity Systems
Financial institutions rely on rigorous compliance processes, such as Due Diligence (DD) and Know Your Customer (KYC) checks, which can be tedious and inefficient, especially given current data and privacy regulations. Digital Identity Systems offer a solution, enabling users to represent their identity through digital records. This technology allows companies to securely manage data and has gained significant interest from governments. FinTech companies are collaborating with public entities to pilot biometric ID programs, which streamline identification processes through biometrics like iris scans, fingerprints, and facial recognition, all encrypted for security. According to Deloitte (2019), Digital Identity provides faster, more cost-effective, and reliable identification, enhancing financial inclusion.
Currency Digitization
Blockchain and DLT have introduced groundbreaking methods to reduce fraud and counterfeiting, particularly in currency transactions. These innovations have captured the attention of central banks worldwide, as digital currencies could improve transaction efficiency, transparency, and regulatory oversight. Early on, FinTech adopted blockchain for remittance services, as cryptocurrencies facilitated low-cost, high-speed transactions of small sums. Extensive research is underway into Central Bank Digital Currencies (CBDCs), which could eliminate clearinghouse and card provider fees, thus bypassing intermediaries like banks (Chiu et al., 2020). Financial Literacy Programs Understanding financial services is essential for individuals and institutions to realize the benefits of accessing financial systems. Ramakrishnan (2012) found that a lack of financial literacy often leads to unmanageable debt due to poor comprehension of financial products,
including risks and rewards. Financial education enables informed decision-making, equipping individuals to navigate financial crises and achieve key financial goals, while also mitigating risks associated with market failures (Popescu AD., 2019).
FinTech Innovations in Digital Assets
Blockchain and DLT have paved the way for digital assets, which are revolutionizing financial services and creating new paradigms in wealth management and user interactions with money. Spulbar and Birau (2019) examined FinTech’s disruptive impact on banking, a core component of economic growth and stability. The rise of digital assets introduces new value propositions, offering bank-like services without intermediaries, though these new offerings also come with unique risks. Traditional banks still hold a position of trust in finance, even if they adopt crypto assets as custodians. Institutional interest from investors, FinTech companies, and central banks is propelling digital assets toward mainstream acceptance as a core offering and a novel asset class.
Distinguishing Utility and Security Tokens: The Swiss Financial Market Supervisory Authority (FINMA, 2018) was among the first regulators to address the crypto market by defining three main crypto asset categories:
- Payment Tokens (Cryptocurrencies): Primarily serve as a means of payment, with examples like Bitcoin, DASH, and Litecoin.
- Utility Tokens: Offer access to specific applications or services, as seen with tokens like Binance Coin, Lisk, or Zilliqa.
- Security Tokens: Provide ownership rights or entitlements, such as dividends or interest payments, for underlying assets like real estate, stocks, or equities. Security tokens, by offering fractional ownership, enhance transparency, liquidity, and immutability through blockchain. While these categories help clarify token functions, hybrid tokens that mix attributes from each category are also emerging.
Conclusions
Crypto assets, smart contracts, and digital assets have transformed how individuals manage money, invest, and interact with markets. The FinTech sector has facilitated these improvements, enabling people to connect with both traditional and new markets, and access tools for diverse financial activities. Blockchain has also introduced entirely new asset classes, along with unique regulatory and tax considerations. Blockchain and DLT enable the tokenization of nearly any asset, though regulatory and tax frameworks remain in flux and require attention from all market stakeholders. As tokenization grows, regulatory challenges will become a priority. In Europe especially, stakeholders call for clear regulatory frameworks before committing to investments in new
technologies. One key challenge is the lack of a unified legal framework that balances security and consumer protection while fostering innovation. To address this, continuous dialogue between industry stakeholders, innovators, and policymakers is crucial. Such collaboration will allow these groups to address questions, clarify regulatory objectives, and set standards that ensure consumer protection while supporting the industry’s growth and innovation. Understanding industry trajectories and regulatory concerns, especially around privacy and consumer rights, will be essential for achieving regulatory clarity.
