Why are banks still not taking crypto seriously?
Although cryptocurrency is nothing new, it is over the last 12 months that it has increased in popularity and talking about it has become more mainstream.
Increases in value in cryptocurrencies such as Bitcoin and Etherium have caused people to sit up and pay attention to all the current news on cryptocurrencies, so it’s now talked about and understood by more people than ever. In other words, this is happening. And it’s real.
Nevertheless, the question remains:
Why are banks and financial institutions still not convinced about its validity as a legitimate currency?
Are they, perhaps, intimidated by its presence due to the fear of traditional banking becoming irrelevant or obsolete as time marches on?
That, and many other related issues, are the topic of today’s discussion as we move closer to uncovering the underlying motives behind their stance. Let’s dive in!
While traditional banks are still very much relevant as of today, cryptocurrencies pose a very real threat of dethroning them in the years to come.
Decentralisation
Traditionally, banks have been in charge of money for the whole country – meaning that banks were required for any transaction processing, making payments etc. With cryptocurrency, it is decentralised, meaning that banks don’t play an active (or any kind of) role in the process. Without exaggerating, this effectively puts them out of the equation as far as making financial transactions is concerned. This puts banks in quite an unfortunate position where they might be forced to rethink a substantial portion of their business model. Because one thing is for sure – less involvement in financial matters means less money in their pocket.
Putting Banks Out of a Job
As well as being involved in transaction processing, banks are in charge of protecting money and investigating where it has come from. Most banks monitor accounts for unusual activity and start asking questions when large amounts are deposited and generally try to keep things safe. Cryptocurrency doesn’t have the need for the same level of compliance, making it another aspect of doing business that banks are no longer involved in.
Customer Base
With the popularity of cryptocurrency on the rise, people will be considering other ways to invest their money. Although most of us are used to keeping our money in savings accounts, the introduction of Bitcoin and other alternatives has opened up the investment market for many. If large numbers of customers opt to remove their money from their bank accounts and store it elsewhere, this will mean that banks have even less use. This will mean that they are likely to need less staff and even fewer branches, which could result in bank closures and mergers.
Unstable/undetermined legislation
In a move that might seem like it’s coming straight out of a sci-fi fantasy novel, El Salvador has adopted Bitcoin as the country’s official currency. In fact, the recent stats suggest that a greater number of its residents have a Bitcoin wallet as opposed to a traditional bank account. Alas, when it comes to the rest of the globe, not all the governments of this world share the same views on Bitcoin and cryptocurrency in general. In turn, this creates an unstable surface for the banks to stand on. Even though some of them might want to show their support and adapt to new ways people do business and store their money, the local government could pull the plug at any moment.
The Future Of Banks
The truth is that although matters will need some additional time to develop, there is a chance that cryptocurrency will reach a high level of adoption, even more so than today. We already know that there are big brands that are starting to accept it as a method of payment, which is a massive step towards introducing this way of holding and exchanging money to a bigger audience.
Conclusion
Banks know that cryptocurrency is a serious contender when placed side-by-side with traditional fiat currency, but they’re currently showing their poker face. They don’t want to admit that it could be an issue; instead, they’ll be carefully pondering their options behind the scenes, all while servicing their customers in the same way they always have – quietly hoping that whatever backup plans they’re considering never actually have to be implemented.
No one knows for sure what the future may hold, but banks will certainly be giving it a thorough think-through and find a way how to secure their future should cryptocurrency take off even further.