THE GREAT THREAT OF BITCOIN TO THE BANKING SYSTEM

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Currently, the topics that have the most positioning are blockchain and cryptocurrencies, both tools of a digital world that have been on everyone’s lips in recent years.

Government entities, large companies, and individuals are considering investments in crypto assets in response to a current market saturated with operations that, in many cases, are not providing the expected profitability.

More and more young companies in the cryptocurrency universe offer services similar to those of traditional banks, an evolution that banks do not like, who want to control this poorly regulated sector.

Cryptocurrencies the lifesaver of the digital market

We are at a crossroads; cryptocurrencies are not only viewed as a profitable investment opportunity in the long term but as a paradigm shift in the international monetary system. This market is believed to shake up the world of politics, economics, and finance.

According to EL PAÍS, in its edition for Americas, reports that cryptocurrency use rose 880% between 2019 and 2020 worldwide, according to data from Chainalysis. 

The boost was especially in emerging countries, where confidence towards the authorities and banks is low and where their fiat currency tends to depreciate, the firm said.

For millions of Latin Americans, cryptocurrencies represent a quick way to receive resources sent by relatives who work abroad, as well as a way to turn the system around. The governments of these three countries know this, and they want to make sure they can benefit from this trend.

The money that central banks print ad infinitum will be worth absolutely nothing in a few years. It will die in the face of the technological innovation of cryptocurrencies, which generates panic in banks and users of legal tender currencies in different countries.

Cryptocurrencies as a form of payment destabilizes banks

If crypto assets such as Bitcoin or ether come to acquire the properties of money and spread as a payment method, the foundations of traditional banking would be destabilized,

Although this does not seem feasible in the short term, smart contracts can pose a real threat over time.

Thanks to some of these cryptocurrencies (blockchain technology), that is possible and does not need an intermediary (banks, lawyers, or notaries) to be implemented and executed. Especially now that Bitcoin established its place in Ukraine.

These contracts are gaining strength, primarily through the Ethereum network, which experts often name and is one of the most used for this type of agreement that does not need an intermediary.

Fiat currencies monopoly 

The digitization of capital markets can bring benefits in the coming years, such as reduced intermediaries and fixed costs, greater market transparency, and a much faster settlement speed.

It is pretty interesting all these new technological tools that allow us to realize how changing this globalized world is, and from this, it is important to start when giving an opinion about the threat that BITCOIN and the various cryptocurrencies represent to traditional banking, 

This has maintained a monopoly for the management of resources in fiat currency. It would be a severe blow to adopt digital currencies as legal tender, where intermediaries are no longer an essential part of carrying out transactions in the market. 

Still, the users are responsible for generating the movements they want through the various applications and platforms.

Although the fact that this happens is complex, we are not exempt from the fact that information technologies and artificial intelligence are increasingly taking place, covering more areas of people’s daily lives, 

Information management is within reach of all this makes it possible to adopt the digital coins and blockchain market model even against the customs and traditionalisms of elderly, users who represent the highest percentage of rejection of this market type. 

Consequently, the process of adaptation to a new system would be really complex for them.

Conclusion

Crypto assets are an alternative safe, and efficient way to exchange goods or services that positively affect the world economy due to their decentralization, excellent liquidity, and flexibility. 

However, it is necessary to know this market before thinking that a change in the financial system is not possible in the future.

Over the years, banking entities are getting more and more on digital operations because they generate a more significant amount of commissions per transaction and, in turn, reduce the issuance of banknotes to satisfy the economic needs of their users.

It could be said that digitized banking operations reduce inflation as far as coin issuance is concerned.

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