The growing impact of Web3 in financial services

Web3 is transforming finance with blockchain, digital assets, and smart contracts, paving the way for a decentralised future.

The Web3 future is quickly taking shape, primarily driven by innovative leaps in financial services. This vision for the next iteration of the Internet—one powered by blockchains that enable direct, automated and trusted interactions—can be seen across a range of growing use cases and is being put into practice by startups and traditional financial companies alike.

The signals of this steadily emerging new reality are all around us. The enterprise blockchain market is predicted to grow to $246 billion by 2030, the same year Boston Consulting Group says real-world asset tokenization will become a $16 trillion industry. Nine out of ten central banks worldwide are actively exploring central bank digital currencies (CBDCs). 

We’ll know we’ve achieved Web3 maturity when the focus is no longer on blockchain and the tools that support it but rather on the solutions and applications that rest on top of Web3 and inform our everyday lives. We’ll need more proven, expert enterprise-level infrastructure providers to power this evolution to get there. 

Core pillars of Web3

Specific definitions of Web3 vary, but all rely on blockchain, smart contracts, and digital assets or tokens as foundational technologies. Together, these three enable the decentralised internet at the centre of Web3.

Blockchain’s distributed and immutable nature enables parties to transact more efficiently, securely, directly and with greater trust. Digital assets and tokens represent the value being traded in these interactions, whether native stores of value or tokenized real-world assets like art, real estate, or carbon credits. Smart contracts are unalterable software programs encoded on the blockchain that can automate these transactions according to pre-arranged conditions and terms. 

Before blockchain, any improvements in the financial services industry during the Web1 and Web2 eras were limited by a necessary reliance on legacy financial systems. Now, by replacing these traditional financial rails with blockchain, digital assets and smart contracts, Web3 allows for groundbreaking gains in performance and the realization of entirely new financial use cases. 

Having begun a decade ago with crypto payments, Web3 technology is now powering financial innovations that seem to be multiplying at light speed, like BlackRock’s first tokenised fund and the first BTC and ETH Spot ETFs. New applications in areas like private asset investing are on the horizon. 

Web3 and enterprise growth

A key factor in the success and expansion of Web3 financial innovations is the presence of a robust group of proven enterprise-level infrastructure providers. These providers facilitate the entry of large, traditional financial institutions into Web3 by offering critical services such as digital asset custody, tokenization, and crypto-enabled payments. Their support helps companies transition into this new technological era without diverting critical business resources, thus accelerating the development and maturation of current and future Web3 financial use cases.

Leading companies in this sector have been pivotal. Established on the transformative potential of blockchain for global financial infrastructure, pioneering firms have been at the forefront of deploying enterprise blockchain for cross-border payments, which has emerged as a standout application of crypto technology. With a strong track record developed over a decade, these companies now deliver expansive services across dozens of markets, handling significant transaction volumes.

Their offerings have laid the groundwork for an expanding portfolio of enterprise products and services that merge traditional finance with crypto innovations. These enterprises have intensified their focus on these areas in the past year, including venturing into digital asset custody through sophisticated infrastructure solutions. The imminent introduction of stablecoins and other financial instruments on prominent blockchain networks underscores their role in bridging the old financial systems with the new digital-led era.

Companies turn to these seasoned providers for their deep expertise, reliability, and emphasis on compliance-oriented infrastructure solutions that facilitate safe, cost-effective blockchain integration into business operations. As comprehensive providers of digital asset infrastructure, these entities streamline the processes needed to tokenize, store, exchange, and circulate value globally using blockchain.

Challenges ahead

While Web3’s promise is undeniable, it comes with challenges and potential pitfalls. Chief among these is the current patchwork of regulations governing blockchain and digital assets worldwide. 

Fortunately, forward-thinking regulatory bodies have recognized the power of Web3 and the need for more established rules of engagement. A raft of new and emerging frameworks, such as the forthcoming MiCA regulations in the EU, stablecoin regulation in the UAE, and digital asset regulation in Australia, help clarify issues surrounding consumer protections, identity and security standards, and the legality and enforceability of blockchain-based contracts. 

Legal certainty around the globe and between jurisdictions will embolden innovators, reassure traditional stakeholders, and exponentially grow the already underway revolution. It will also help cement critical consumer protections necessary to give users the confidence to engage in new products and services. 

The Web3 revolution

Ultimately, the adoption and use cases for Web3 will vary significantly by country. Those with less mature banking infrastructures have jumped directly to new Web3 applications to accelerate financial inclusion, while other jurisdictions are witnessing slower, steadier growth that emphasizes efficiency and cost reduction over time. 

However, what is certain is that Web3 has the potential to dramatically reshape financial services around the globe and address systemic issues related to financial inclusion, affordability, and security. Done successfully, blockchain will fade into the background as a topic of conversation and become as invisible as the cloud or smartphone operating systems, opening the door to even newer and more innovative financial applications.