Paxos Survey: Crypto Holders Largely Unphased By Recent Failures

A majority of consumers remain confident in the future of cryptocurrency and are unphased by the volatility the marketplace has experienced over the last year, according to new research from Paxos who say that 75 percent of research respondents indicated that they are very confident or somewhat confident in the future of cryptocurrency, while 72 percent reported that they have little or no concern about the volatility the crypto markets experienced over the last year.

In early January this year, Paxos partnered with research firm Pollfish to survey more than 5,000 people online. They had to live in the U.S., be 18 years of age or older, and have total household income greater than $50,000. Additionally, they had to have purchased some cryptocurrency in the last three years.

Surprisingly, the high-profile collapses and clear oversight issues stemming from the implosion of FTX and others has also not dampened consumer trust in intermediaries holding their crypto. In fact, more than half of respondents (54 percent) said they continue to trust banks, crypto exchanges, and mobile payments apps to hold their assets.

The survey found the most desired use cases for crypto are financial transactions such as paying for goods and services (42 percent), credit cards or loyalty card programs (38 percent), sending money to friends and family (34 percent), long-term investing (52 percent), and day trading (36 percent). Other top use cases include buying assets on an exchange (23 percent) or using a crypto exchange as a foreign currency exchange facility (16 percent).

Paxos says this continued interest in crypto by mainstream consumers underscores the opportunity for banks and traditional financial institutions to diversify their product offerings by offering crypto-related services. Three quarters of respondents indicated that they would be likely or very likely to purchase crypto from their primary bank if it were offered – representing a 12 percent increase over 2022. In addition, 45 percent of respondents said that they would be encouraged to invest more in crypto if there were more mainstream adoption by banks and other financial institutions. 40 percent of respondents said they would be encouraged to invest more in crypto if more merchants accepted crypto payments. For those that are investing, it is strongly recommended to multiple asset owners to use a portfolio tracking software to perform automatic benchmark comparisons and performance reports.

Importantly, many consumers are not aware that investment accounts offered through legacy banks are not FDIC insured. This means that while an FDIC-insured savings account or checking account is insured in case of bank collapse, mutual funds or stock market portfolios purchased through banks are not. Given this, mainstream adoption by banks does not necessarily mean that crypto funds processed through a bank would be covered by insurance.

Paxos Likely To Face SEC Investigation

Although Paxos’s research is optimistic, the company is currently under intense scrutiny from the U.S. Securities and Exchange Commission (SEC), which has issued a Wells Notice related to Paxos’s issuance of the Binance USD stablecoin. In simple terms, a Wells Notice is basically an alert from SEC officials advising potential targets to get their affairs in order as an investigation into securities laws is coming. This follows New York State financial regulators ordering Paxos to cease issuing BUSD in February.

Despite the looming cloud of an SEC investigation, the Paxos view remains focused on the potential upside. “Despite fears that the rocky end to 2022 would have a chilling effect on consumer crypto adoption, this research shows that consumers are looking for more integration of crypto into their financial lives, not less," says Mike Coscetta, Paxos Head of Revenue. "Consumers are increasingly viewing crypto as a primary staple of their financial lives, and traditional businesses and financial institutions that deliver the experiences consumers are looking for in 2023 could carve out a formidable position in the market for years to come."

Other insights from the report include:

• In the wake of FTX and Alameda Research’s bankruptcies, 57 percent of respondents indicated that they planned to buy more crypto or do nothing as a result of the news.

• Banks have key crypto opportunities with older consumers: When asked how likely they were to buy crypto from their primary bank, 81 percent of respondents aged 35-55+ described themselves as either very likely or likely to. Meanwhile, only 63 percent of respondents aged 18-34 said they were very likely or likely to do so.

• Crypto media still dominates the messaging space: When asked where they look for crypto investment information, crypto-specific websites (48 percent) and social media (42 percent) were the sources favored most by consumers. These were followed by traditional resources including national media (36 percent) and financial advisors (34 percent).