Crypto’s success proves it doesn’t need consumer trust

Consumer confidence in cryptocurrency is declining, but that doesn’t seem to matter. Buying intent for digital assets like bitcoin and ethereum has remained relatively flat year-to-date, as has cryptocurrency ownership in general.

It would be hard to imagine any other financial product, brand or asset with negative – and declining – net trust among consumers nonetheless showing stable and strong purchase intent. But cryptocurrency by design is not a normal financial asset. As predicted when it was created, crypto challenges the idea that trust is fundamental to financial services, and leaders should take notice.

This does not mean, however, that consumers are losing trust in traditional providers. Cryptocurrency owners actually show strong trust in traditional vendors, which means there may be room for trust and “lack of confidencein the future of financial services.

Many consumers are willing to buy a financial product they don’t trust

Trust in cryptocurrency among the general US public is net negative (among those familiar with the term, more distrust cryptocurrency than do), having declined year-to-date by – 30 percentage points in January to -38 in April, according to Morning Consult’s monthly survey of 4,400 consumers on their cryptocurrency opinions and habits.

The drop in confidence is not unjustified. The bitcoin price continued to exhibit its characteristic volatility, and the hackers Fly near-record amounts of crypto from exchanges since the start of 2022.

And yet, about a quarter of adults say they plan to buy cryptocurrency in the next month, down just 2 percentage points from January. Among these likely buyers, only 21% say they trust cryptocurrency “a lot” while 57% trust it “a little”. The remaining 21% admit they don’t trust cryptocurrency but plan to buy it anyway.

Crypto works as it should

If you’re surprised that cryptocurrency ownership is holding steady despite declining confidence, you shouldn’t be. Crypto evangelists have long said that the purpose of blockchain technology and cryptocurrency is to create a “trustless” network – not in the traditional sense, but without trust insofar as consumers do not need to trust it because they can verify ownership and transactions themselves.

After all, Bitcoin, considered the first cryptocurrency, was created in 2009 in the aftermath of the Great Recession which decimated trust in the global financial system and in financial service providers in particular. The idea at the time was to create a store of value and a method of transaction that did not require a central authority – a private bank, central bank or other financial service provider – to verify or guarantee the currency, because consumers could do it themselves. This would allow them to conduct peer-to-peer transactions with confidence and without intermediaries.

Lack of trust can seem like a direct threat to traditional financial service providers who spend billions building their reputations on trust and consider it their most important asset. But as data from Morning Consult shows, legacy institutions may not need to worry: Lack of trust is not an inherent threat to trust after all.

Cryptocurrency owners trust financial institutions

Trusted and trustless financial services are not mutually exclusive in the eyes of cryptocurrency owners. About two-thirds of American adults (67%) say they trust banks, and the share among cryptocurrency owners isn’t much different at 64%.

Consumer confidence in financial service providers, March 2022

Survey conducted March 31 through April 3, 2022 of a representative sample of approximately 2,200 U.S. adults, with an unweighted margin of error of +/- 2 percentage points.

Perhaps surprisingly, cryptocurrency owners’ trust in most financial institutions, including credit unions and investment management companies, is actually higher than that of the general population. This should be seen as proof that consumers can trust traditional and unreliable financial services.

There may also be room for distrust in traditional financial services

The question for financial services leaders may not be whether lack of trust threatens the trust that their legacy institutions have worked so hard to build, but whether they can improve relationships by embracing both tradition and innovation.

It seems that many financial service providers are trying to accomplish just that. For years, leaders in financial services have denounced or ignored cryptocurrency, but many are now pursuing their own cryptocurrency strategies and will need to find the right balance between adhering to the ethics of trust and maintaining their other fiduciary duties. Trust is based on access, control and transparency, which means that in addition to playing their role in the security of financial assets, institutions will also need to provide customers with access to a wide range of cryptocurrencies and of decentralized financial products, as well as control over when and how they use them and greater transparency over how assets move.

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