Fintech vs Crypto: What’s The Difference?

fintech vs crypto


The number of Fintech startups has nearly doubled in the past two years and venture capitalists are rapidly pumping more money into these projects. As of 2023 reports, the Fintech sector is worth $179 billion. Meanwhile, the crypto sector has exceeded $1 trillion in assets and is continuing to grow as Web3 garners worldwide acceptance.

While government-managed institutions continue to control most of the world economy, cryptocurrencies are a refreshing deflection from the old ways of financial dealing. Given this change, can we consider cryptocurrencies as a part of fintech? If yes, how will they change the future of finance in the coming decades? Read on to learn more.

What is Fintech?

Fintech refers to any technology that enhances the efficiency, outreach, and overall delivery of financial services. Created by combining the words “financial” and “technology”, Fintech encompasses a broad group of technological developments that automate financial markets. The advent of smartphones and widespread internet access has allowed companies, new entrepreneurs, and consumers to play a larger role in the utilization of this technology.

The growth of Fintech can be seen as an offshoot of the technological revolution which sought to improve the functioning of already established financial institutions. With time, fintech-inspired services have penetrated a larger band of consumer-oriented sectors such as retail, education, e-commerce, and fundraising.

What is Crypto?

Cryptocurrency or “crypto” is a term used for a range of encryption methods and algorithms that secure transactions on the blockchain without interference from intermediaries. As a technology, crypto-based networks are known for decentralized record-keeping that enables greater autonomy and security to participants.

In everyday life, crypto is commonly used to refer to cryptocurrencies. These are digital currencies that have no physical form and exist on an immutable blockchain. The exchange value and transferability of cryptocurrency depend on a publicly verifiable peer-to-peer network. The present cryptocurrency system is mostly used to monetize and facilitate projects on Web3.

Is Crypto a Fintech?

Fintech is a broad term that covers a wide group of activities around transactions in business and money management. When most of the financial services were carried out through traditional banks and trading firms, Fintech was limited to back-end operations. However, with the progress of technology, new ways of handling the public as well as personal finances continue to emerge.

Most inventions in the fintech sector aim to disrupt the entrenched inefficiencies of traditional financial institutions. For instance, people can now avoid traveling to a bank branch for money transfers or credit. Online services and smartphone apps are enough to cover most transfers, credit applications, and cash deposits from the comfort of your home. It is thus safe to say that the key role of fintech is to make financial services simpler and more accessible.

Now that we know the role of fintech in our lives, can we consider crypto to be a part of this sector?

Given the increasing use cases and popularity of cryptocurrencies, the short answer is yes. However, finance is just one of the facets of crypto. As an evolving technology, there are many other non-financial sectors that can benefit from crypto. Let us take a deeper look.

Crypto is an independent domain of tech

Many experts see cryptocurrencies and related assets as separate domains of technology. Technically, this is true because the basis of crypto is the distributed ledger or blockchain technology. We cannot view or use cryptocurrencies as independent from their parent blockchain. This means that a crypto token or any asset built on the blockchain does not have exchange value beyond the one imparted by its association with the blockchain network.

At the same time, inventions in the crypto universe are not limited just to currencies. Blockchain enthusiasts are constantly developing wider uses of crypto technology that will impact business and individual engagement on the Web3. Inventions such as the Soulbound Token, which is a type of social identity proof on Web3 is one example.

Fintech could use crypto to enhance services

Since blockchain has diverse applications, the role that it serves in a given instance determines what we call it. There are many functions where cryptocurrencies are being used to disrupt and transform the present financial ecosystem. Examples of these include NFTs, game tokens, and DeFi platforms which pay cryptocurrencies to their members for completing tasks. In such a case, crypto clearly becomes a part of the financial sector. Investments in such platforms have a direct impact on the worldwide financial system and asset creation. Seen from this perspective, crypto can be considered a part of fintech as it has a clear effect on financial inclusion and business practices.

Crypto is changing the financial world

The utility of crypto-based systems has been proven in areas such as networking, consensus building, record keeping, and custodial services. Given these myriad applications, crypto has the power to cause long-lasting shifts in the governance and management of many industries.

Crypto Is More Than Currency

The numerous inventions around possible uses of blockchain technology make one thing clear — crypto is more than just a currency.

Beginning with the launch of Bitcoin in 2009, the growth of cryptocurrency as a decentralized asset class has only been on the rise. Here are a few areas of the financial system where the impact of crypto has been significant.

1. Decentralized Finance

The growth of DeFi is a step towards enabling cryptocurrency-based transactions to become a part of mainstream life. DeFi uses blockchain technology to create peer-to-peer transactions between users. This allows for the complete elimination of intermediaries, meaning you do not need any banks or financial institutions to complete your transactions with another party. As a result, decentralized finance challenges traditional centralized financial systems as it endeavors to build a financial network that supports greater transparency and individual autonomy.

2. Growth of NFTs and GameFi crypto

Since the covid-19 pandemic, the world has noted a steady rise in non-traditional investment options. NFTs have grown in popularity as they serve the twin purpose of showcasing authentic ownership as well as being a vehicle of wealth creation. Famous NFTs collections such as Cryptopunks, Bored Ape Yacht Club, and the NBA Top Shot have been traded for millions of dollars online. Another branch of crypto tokens that has taken the virtual community by storm is GameFi tokens such as Axie Infinity Shards (AXS) and CryptoKitties. People can win these tokens by participating in play-to-earn video games and selling them for a profit in NFT marketplaces.

3. Crypto as Legal Tender

The year 2022 saw countries like the Central African Republic and El Salvadore adopting Bitcoin as a legal tender. Citizens in these nations can now make official payments throughout the country using cryptocurrencies. Experts have quoted this move as a bid to ease money transfers and attract investments from other countries. As a financial decision, this change hints towards a wider trust in the prospect and dependability of cryptocurrencies.

The digitization of money is becoming a popular financial intervention in most economic institutions. Governments of some countries are using blockchain technology to launch their own version of digital currencies called the Central Bank Digital Currencies (CBDCs). This fact proves the power that cryptocurrencies can wield in the fintech sector in the coming decades.

MRHB and the Growth of Islamic Fintech

As more people join the Web3 bandwagon, there is a growing need for financial services that cater to diversity. The principles of Islamic finance focus on sustainability and social responsibility as core principles of wealth creation. This means that any financial products directed at the Islamic community must abide by ethical guidelines. This is where MRHB comes in. Built to enhance financial inclusion for faith-conscious communities, MRHB offers halal DeFi, NFT, and other crypto assets which adhere to the tenets of Islamic finance.

Inventions such as the Sahal Wallet and Souq NFT marketplace are some examples of fintech solutions that seek to break away from institution-dependent financial practices which tend to restrict individual choice. Every financial asset traded or minted on these platforms is screened automatically as well as manually by the Sharia Governance Board (SGB). This ensures that any digital investment you make on this platform is completely permissible and encouraged under the rules of Islamic Finance.

The growth of Web3-based businesses is an opportunity to make financial services more accessible for minorities and new-age investors. Cryptocurrency-based solutions can help in giving greater security, transparency, and autonomy of choice to previously excluded small investors. Start your halal crypto journey with MRHB via the Sahal Wallet app today.