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Digital Asset Digest: How fintech can help build a greener world
COP26 – the 26th United Nations Climate Change conference – saw climate change move even further up the list of priorities for corporations and governments. The two weeks of talks and negotiations saw a coalition of banks, insurers and investors with $130 trillion at their disposal pledging to put climate change mitigation at the heart of their work. As the race towards net zero becomes a prerequisite of the survival and prosperity of the human race, the fintech sector has an important role to play in helping this transition.
The technology sector has been at the forefront of the so-called green revolution, as the world pivots away from fossil fuels and heavy manufacturing towards a digital, resource-light economy. Traditional financial companies, meanwhile, have so far been stuck in a grey area when it comes to sustainability. On the one hand, global financial institutions have been increasingly focusing their efforts on sustainability, but on the other, banks have been under fire for continuing to fund fossil fuels.
The fintech sector sits at the intersection of finance and technology, and as such it is in pole position to combine the best elements of the two. Being a relatively young and innovative sector, fintech is free of the legacy issues that some of the older financial institutions are still struggling to shake. And this allows fintech to lead the transition to a more sustainable economy, leading by example on environmental, social and governance (ESG) issues.
Leading by example
One of the big issues standing in the way of integrating sustainability across business strategies is the lack of data necessary for climate reporting. Fintech companies are in a position to offer the necessary infrastructure for better quality data, underpinned by blockchain technology. New technologies can be used to analyze data and hold businesses accountable for meeting their net zero commitments.
At the same time, innovative fintech companies are driving financial inclusion by making investment solutions available to a wider range of users across many different countries and communities. This also includes fintech companies which are educating users on climate issues and offering investment solutions that exclude the biggest polluters, such as coal and gas.
Financial inclusion is at the heart of YIELD App’s mission to make opportunities available to everyone, in all parts of the world. At a time when inflation is eroding away savings, YIELD App is committed to bringing the lucrative passive income opportunities available from digital assets into the mainstream.
Our Chief Investment Officer Lucas Kiely highlighted this important mission for YIELD App in the "Responsible Fintech" program, a co-production between FINTECH Circle and ITN Productions which explores the role of fintech in driving sustainable and responsible finance.
“Cryptocurrency is essentially the evolution of money, and what is important about decentralized finance is that it allows everybody to become their own bank,” says Lucas.
To see what else he had to say about YIELD App’s role in creating a more sustainable financial ecosystem, watch his interview with ITN news presenter Sharon Thomas on our YouTube channel.
“Responsible Fintech” features key industry interviews, including with fintech accountancy service Tink and insurer Marshmallow, as well as reports and profiles to showcase how fintech businesses can help reach global net-zero targets. The full film will premiere at the Fintech Connect Conference tomorrow – Wednesday, 1 December. Click here to register and watch the premier.
The role of digital assets
Digital wealth management platforms like YIELD App empower everyday users to take control of their own money and how they invest it, allowing them to see exactly how it is performing day in, day out. This provides users with greater transparency than a traditional bank or investment account, and the high annual percentage yields (APYs) help them achieve their financial goals faster.
Unlike some other forms of investments, digital assets also promote financial inclusion, as they are open to everyone, with a small minimum investment. For example, the minimum deposit into the YIELD App platform is just $100, while the set-up process is simple and quick.
Digital assets also remove barriers when it comes to international money transfers, allowing users to avoid the astronomical fees often charged for transferring money abroad, especially to developing countries with less developed infrastructure. Losing less money on fees makes cryptocurrency a preferred option for an increasing number of people.
The greater good
While they are increasingly driving financial inclusion, however, cryptocurrencies have been criticized for requiring large amounts of energy to produce, with many calling them out for being unsustainable as a result. However, this issue isn’t so black and white – or, perhaps, not so green and brown.
For one thing, the issue of excessive energy consumption concerns Bitcoin and other proof-of-work cryptocurrencies, which require mining to create. Mining is the process of creating new coins by solving complex mathematical equations, which requires large amounts of computer power.
However, many of the newer cryptocurrencies, such as Solana and Cardano, are operating on a proof-of-stake model, a consensus mechanism which uses the community to validate transactions, doing away with the need for energy-intensive mining.
Source: https://coinmarketcap.com/view/pos/, November 22, 2021
The number of such tokens grows every day, but of course it would be wrong to ignore the fact that Bitcoin remains the dominant cryptocurrency, with around 42% of the total market share. But while Bitcoin mining does use energy-intensive practices, there are ways to use this energy for the greater good.
For example, mining data centers are now increasingly turning to sustainable energy sources, as these tend to be cheaper – and better for the planet. In addition, there are initiatives looking at how to recycle or reuse the excess heat generated from mining operations. For example, a partnership in Northern Sweden, led by the Boden Business Agency, is working on a solution that will use this excess energy to heat greenhouses to grow food, ensuring that this heat isn’t simply wasted.
Fintech and digital assets are in a strong position to contribute to a more responsible, green and fairer world. As the ecosystem grows and develops, there will be even more opportunities for synergies between fintech and sustainability. The future of fintech, and the future of crypto, is as a leader in responsible finance, financial inclusion and greater environmental awareness.