Why institutions are choosing AI over cryptocurrencies?

May 16, 2023

By Anjali Kochhar

Several studies have come up that show that institutions these days are preferring artificial intelligence over blockchain or distributed ledger technologies.  

According to an analysis conducted by global financial institution JPMorgan, artificial intelligence is favoured four times more than blockchain or distributed ledger technologies. The survey noted 53% of the institutional investors surveyed believe that artificial intelligence (AI) and machine learning will be the most influential technology in shaping the future of trading over the next three years, a significant increase from 25% the previous year.

Let’s understand what could be the reasons institutions now prefer AI over crypto:

Established Use Cases: AI has a wider range of established use cases across various industries such as healthcare, finance, logistics, and retail. In contrast, while crypto has potential applications in finance and related fields, it is still relatively new and not as widely adopted. Since AI has established use cases educational institutions have started courses so that the students remain well-equipped with the technology.

Abhay Kumar Co-Founder and Director at the Institute of Real Estate and Finance (IREF) says AI and machine learning are predicted to be the most influential technologies in shaping the future of trading over the next three years. This is significant news for educational institutions, as AI is becoming increasingly essential across various industries, and our students need to be prepared for this shift.

“On the other hand, blockchain and distributed ledger technology (DLT) are also gaining traction, but it’s not as popular as AI. This technology can be a useful tool in many industries, but its adoption is still limited compared to AI. Furthermore, crypto and digital coins have gained a lot of attention in the industry, but the majority of institutional investors have no plans to trade them. As an educational institution, it’s essential that we prioritize teaching our students about the technologies that will have a significant impact on their future careers,” Kumar adds.

While there are institutions that teach blockchain as well, still, only fewer are interested in the same to date.

Predictability: AI investments may be viewed as less volatile compared to crypto investments. AI technology has been around for decades and has a track record of development and improvement. On the other hand, the crypto market is still relatively young, and the prices of cryptocurrencies can fluctuate significantly in short periods.

Hariom Seth, Founder and CEO of Find.Inc, says, “The growing preference for AI over cryptocurrencies among institutional investors is driven by several factors, including the ability of AI to enhance the efficiency and accuracy of financial operations, its increasing sophistication, and the challenges faced by cryptocurrencies and blockchain technology. While cryptocurrencies and blockchain may still have a role to play in the future of finance, it is clear that AI will continue to be a significant force in shaping the industry for years to come.”

Regulatory Environment: AI is subject to fewer regulatory hurdles compared to cryptocurrencies. Governments and financial regulators are still grappling with how to regulate crypto, which can create uncertainty for investors. Koneru Lakshman Havish, Vice President, KL Deemed to be University says, “One reason is that AI has shown significant potential to transform various industries, such as healthcare, finance, and transportation, by improving efficiency, reducing costs, and enabling innovations. This has led to increased investment in AI research and development and the creation of new AI-based products and services.”

“On the other hand, crypto has faced some regulatory challenges in many countries, including India, which has imposed strict restrictions on cryptocurrency trading and investments. This has limited the growth and adoption of cryptocurrencies in India and other regions. However, there are still many crypto enthusiasts and investors who see the potential of blockchain technology and cryptocurrencies and are actively investing and developing new crypto-based applications and services.”

Institutional Adoption: More institutional investors are starting to adopt AI technology in their operations, which can create a more stable investment market. Crypto, on the other hand, is still largely dominated by retail investors and early adopters. Sami Anand, Associate Dean and Assistant Professor Head of Department Training and Placement School of Computer Science and Engineering at Lovely Professional University, said, “Cryptocurrency had its period in which it was accepted, people were excited about it but with government regulations and government checks coming into play, the bubble burst. With blockchain, there are multiple ways to implement blockchain technology, but for a common man to have access to it and comprehend it, is a bit difficult but for businesses yes, it is important. Considering It’s not that common man`s value, it’s not that interesting to people.”

To conclude, while AI is preferred over crypto as of now for several reasons, blockchain technology is yet to unleash its full potential and is not going anywhere.

Marc Despallieres, Chief Strategy and Trading Officer at Vantage, says, “AI and DLT are both innovative technologies that have the potential to revolutionize the financial industry. However, they serve different purposes and are not necessarily in competition with each other. AI enables machines to perform tasks that usually require human intelligence, such as detecting fraud, automating processes, and generating insights from large amounts of data.”

“In contrast, there are instances where DLT may be preferred because it can facilitate secure and transparent peer-to-peer transactions, reducing the need for intermediaries and lowering transaction costs. The choice between AI and DLT will depend on the specific use case and the objectives of the financial institution.”

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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