Independent Banker - November 2022 - 57

First, some definitions
CRYPTOCURRENCY
Also known as digital assets, digital currency, virtual currency and
even digital money, cryptocurrency refers to a way to store and
exchange value electronically. The " crypto " prefix refers to advanced
mathematical codes used to store and transmit transactions in a
secure format. Market demand and limited supply influence the price
of digital currencies, making them volatile and highly speculative.
While bitcoin (BTC) remains the most recognizable digital asset,
other popular cryptocurrencies in the U.S. include ethereum (ETH),
Tether (USDT), Ripple (XRT) and Litecoin (LTC).
BLOCKCHAIN
Are your customers starting to
ask about products and services
involving cryptocurrency? If so, or
even if you're just in research mode,
be prepared to navigate the everchanging
cryptocurrency landscape
to assess when, how or even if to dive
into crypto.
As of Q3 2022, it's estimated
that about 46 million Americans-
approximately 14% of the U.S.
population-own cryptoassets,
according to Ron Quaranta, founder
and chairman of the Wall Street
Blockchain Alliance in New York City.
" Now is the time to engage in the
education process internally, as well
as to begin to scope out what clients
may look for in the future, " Quaranta
says. " What happens for those clients
who want to be paid in cryptoassets
or whose businesses accept crypto
for payments? "
Gary Smith, partner-in-charge of
financial services at Eide Bailly LLP
in Phoenix, adds, " Having a focus
on understanding innovation and
its impact on clients' needs will be
critical to the future success of all
banking and financial services. "
To get you started, here
are five things to know about
cryptocurrency today.
The backbone of some forms of cryptocurrency, like bitcoin, is the
blockchain. At its most basic level, blockchain refers to the " blocks "
that get added to the " chain " of digital records (akin to a database).
The chains provide a continuing list of records with data that can
only be added; once validated, the information cannot be deleted or
altered. The blockchain is a type of distributed ledger technology.
DISTRIBUTED LEDGER TECHNOLOGY (DLT)
Although a blockchain is a form of distributed ledger technology,
distributed ledgers do not need to be in a chain like the blockchain.
Put simply, a distributed ledger is a shared database that is spread
across different computers or " nodes. " A distinguishing feature of
DLT is it often restricts who can use, access and operate as a node on
the network. This " permissioned " model has become more popular
with banks.
STABLECOIN
Pegged to a fiat currency like the U.S. dollar, a basket of currencies or
gold, stablecoins offer a less volatile form of cryptocurrency. Tether
is the biggest stablecoin that is backed by the price of national
currencies like the dollar, the euro or the Japanese yen.
CENTRAL BANK DIGITAL CURRENCY (CBDC)
A central bank digital currency is a digital form of a fiat currency
that is issued and regulated by a monetary authority of a country or
region. In the U.S., this also has been coined the " digital dollar. "
This is an edited excerpt from a Main Street Matters article. Read the
full piece at bit.ly/cryptoblog20. If you'd like to understand even
more about cryptocurrency, ICBA released a series of webinars on the
topic last year. Find the first in the series here: bit.ly/ICBAcrypto101
independentbanker.org Q 57
http://www.bit.ly/cryptoblog20 http://www.bit.ly/ICBAcrypto101 http://www.independentbanker.org
Independent Banker - November 2022

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