Der Bank Blog: Blockchain as a Key Technology for the Financial Sector

Moritz Schildt, the CEO of coinIX has written an article on the bank blog. Here you can access the origitanl german article. Click here to access the original article. In this medium article we present you the english translation of the article.

Twenty years ago, Web 2.0 revolutionized the digital landscape with interactive platforms. Today, we stand on the brink of a similar transformation with Web 3.0, built on blockchain technology, which allows for the secure, instantaneous transfer and storage of digital assets and rights. Could blockchain disrupt the banking system in the same way that digitalization once threatened traditional bookstores?

The blockchain, popularized by Bitcoin, holds the potential to radically reshape the financial world. Its decentralized, transparent, and efficient processes offer a reliable way to track the ownership and transfer of assets — functions that, until now, have traditionally been handled by banks.

Bitcoin and Cryptocurrencies: Still a Skeptical View

Many financial institutions remain skeptical of Bitcoin and other cryptocurrencies as serious investment vehicles. Whether it’s due to concerns over the lack of intrinsic value, high volatility, or the broad array of associated risks, the hesitancy is evident. However, those who dismiss blockchain — the technology behind Bitcoin — may risk missing out on a fundamental shift in the way we think about money and assets.

Crypto for Portfolio Diversification

One notable trend is the growing inclusion of cryptocurrencies in traditional investment portfolios. Institutional investors and established funds are increasingly adding crypto exposure as a way to diversify and optimize their risk-return profiles. The correlation between Ethereum and traditional assets like the S&P 500 is relatively low (around 0.3), making it an attractive addition for risk diversification.

Investors are now allocating between 2% and 5% of their portfolios into Exchange-Traded Products (ETPs), which track the value of cryptocurrencies or baskets of digital assets. This shift reflects a growing acceptance of cryptocurrencies in mainstream finance.

Cryptocurrencies as an Alternative Investment Class

Among younger investors, cryptocurrencies are becoming an appealing alternative to traditional financial products. Instead of relying on savings accounts or mutual funds, many are choosing self-managed wallets to directly invest in digital currencies. This method of wealth-building is flexible and decentralized, bypassing banks and traditional financial services altogether, with no need for complex paperwork or intermediaries.

Stablecoins: A New Frontier in Global Payments

Another promising application for cryptocurrencies is in international payments. Stablecoins, which are pegged to traditional fiat currencies like the US Dollar, are enabling faster, cheaper, and legally secure cross-border transactions 24/7. This presents a significant advantage for global businesses looking to streamline international payments without being constrained by the operating hours and fees of traditional banks.

Tokenization of Alternative Assets

Blockchain technology is also transforming the way alternative investments are handled. Art, real estate, and even music rights are being tokenized, allowing small fractional investments in these high-value assets. Through specialized platforms, investors can now buy and sell tokenized assets with ease and transparency. A recent study conducted in Germany highlighted the speed and transparency of blockchain as key benefits of tokenized investment products.

This evolution opens up access to previously inaccessible markets for a broader range of investors, offering new avenues to diversify portfolios with just a few clicks — without the need for traditional financial intermediaries.

Traditional Securities Go Digital

The tokenization of traditional securities, such as stocks and bonds, is also gaining momentum. In Germany, the Electronic Securities Act (eWpG) has laid the foundation for digital securities, allowing for instant transfers of financial instruments, potentially replacing the conventional “T+2” settlement period. The ability to transfer securities instantly could eliminate settlement lines and drastically reduce costs.

Digital securities promise lower transaction costs, faster settlements, and greater transparency, compelling financial service providers to adapt to this new paradigm in order to remain competitive.

DeFi: The Rise of Automated Finance

Decentralized Finance (DeFi) is another exciting frontier within the blockchain ecosystem. Through “smart contracts,” DeFi enables automated financial transactions, with cash flows triggered by predefined conditions. This could lead to entirely new types of digital marketplaces that operate seamlessly, without the need for intermediaries or human error.

DeFi platforms are also making it possible to execute secured loans where the collateral is automatically liquidated if certain conditions are met. This is just one example of how blockchain could fundamentally change the landscape of finance.

Blockchain: Trust in the Digital Era

For users of traditional financial services, trust has always been rooted in the credibility of the institution and its employees. Blockchain offers a new kind of trust — one that is digital, transparent, and auditable. Blockchain creates verifiable, immutable records of transactions that can be traced and trusted without the risk of manipulation. In fact, digital confirmations could soon be more valuable than paper-based bank statements.

As digital trust becomes more widely accepted, users are likely to embrace digital financial services with the same confidence they currently place in traditional institutions. Banks and financial providers must be prepared to adapt to this rapidly changing landscape.

About coinIX

coinIX GmbH & Co KGaA, based in Hamburg, is a listed In company and has been investing in the broad spectrum of blockchain innovation since 2017. This includes the next level of digitalization in traditional industries, as well as new fields such as Decentralized Finance (DeFi). For this purpose, coinIX invests in equity of startups, early token projects and liquid cryptocurrencies. It offers a listed share that is traded on the open market of the Düsseldorf Stock Exchange.

About COINVEST SCI1

Launched in June 2022, coinIX COINVEST SCI1 is an open domestic special AIF under the KAGB. As a sub-portfolio of coinIX COINVEST Investment Stock Corporation with variable capital, its assets are managed by coinIX Capital GmbH, acting as a registered capital management company. Available for subscription by professional or semi-professional investors, the fund has the flexibility to invest up to 100% of its capital in crypto assets, aiming for a diversified portfolio of digital assets actively managed through ongoing selection processes. Additional income streams are generated through staking and other blockchain-native mechanisms. With the ISIN DE000A408Q55, subscriptions to the fund are only available directly through the investment company, with private investor acquisition prohibited.

Check out the recent mwb Research report of coinIX: