Will the Financial Markets Decentralize Themselves?

professional trader
professional trader

If you have never heard about Fintech, then you may not know of the changes that they are trying to bring to financial markets. The goal of cryptocurrencies has always been to reduce the power of banks on the market. Their group and the Fintech companies want to decentralize the whole system, to put an end to the centralisation of power, in financial markets. Here is a look at the current situation and where it is heading.

The Coinbase Experiment

Last April, one of the largest cryptocurrencies in the world decided to distribute its initial public offering, directly to the public, instead of passing through a network of institutional investors. It is a great example of what Fintech is trying to do, which is to reduce the weight of banks and other financial actors, in the financing of companies and assets.

Today, for an individual to acquire stocks and other financial values, they need to go through a broker. In fact, it is still very important to be able to find the best trading platform to do so. Otherwise, it can get pretty costly, if the service is not sufficient and rapid enough, in a world where every second count. But platforms like Coinbase want to eliminate these intermediate and sell directly to the public.

Regulations and Public Protection Issues

The real problem with the idea of Fintech, of selling straight to the public, is that some companies might not respect the same rules when they sell directly to consumers. It could place them in danger of losing their investment. Through the conventional network of pension funds, mutual funds, endowments and other institutional investors, the regulations are under extreme surveillance, which protects everyone’s investments.

The flip side of the coin is that these financial giants, end up making a lot of money, that doesn’t return to the companies or to the investors. In a world that is trending towards eliminating all intermediaries between product and consumer, this does not look good anymore. That is why Fintech would like to see the system change, by removing the immense power that the current financial institutions hold over society.

Creating New Rules

The only real solution, in the near future, might be to review the regulations that rule the financial markets. These amendments would then adapt better to direct investment, as the Fintech companies are pushing along. That said, we can expect the players inside the financial system, to make it a difficult task for those in power.

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