Whenever e new revolutionary technology shows up, there is worry that it could make almost useless or destroy what came before it. Bitcoin, a type of digital money based on cryptography, has been here for a couple of years now and is gradually getting mainstream, alongside with many other cryptocurrencies. While misjudged at first, more people and institutions around the globe are beginning to perceive how cryptocurrencies can give more security, secrecy, and transparency at the same time, and flexibility compared to the traditional financial system that seems nothing can replace it.
Actually, those financial institutions and banks are beginning to wonder that they may not be any more so important as they used to be. While many banks and bit financial institutions say Bitcoin or cryptocurrencies are a bubble, the same ones are filling for patents on the blockchain innovation behind. And some banks openly admit that Bitcoin will destroy them but still others are stating there is an open door for everybody. In this article, we will look at both sides of the “coin.”
Bitcoin and Cryptocurrencies as a Danger
Bank of America, one of the world’s largest financial institutions, admits Cryptocurrencies are a threat to its business model. Another bank is that openly admits that is French bank BNP Paribas. There is a fear that they will be obsolete since cryptocurrencies do not need a third party to make transactions and people will prefer going that way.
Another thing would be the privacy that cryptocurrencies offer which will attract people are looking for this option that banks can’t offer.
Also, people in third world countries where they are cut off from doing business with the other part of the world through traditional banking have an opportunity to use cryptocurrencies to participate in the world market. Whatever the case, Banks and financial organizations are beginning to focus more and openly admitting the competition created form cryptocurrencies.
A UK report about cryptocurrencies infers that digital currency is a threat for the banks, particularly if banks keep on ignoring the changes in the consumer behavior of handling payments. For instance, the report expressed, “Bitcoin clients can deal with a large number of their everyday payments, without the need for banks, at the same time avoiding the bank charges.
Another report named ‘The Changing World of Money’ considered cryptocurrency as a risk to banks. They underlined that Bitcoin and other cryptocurrencies are more able to respond to the business needs and more able to adapt to the new environment than banks. Also, the report clarified that banks’ has heritage frameworks, information administration, expanded expenses of administrative controls etc making their operation slow compared to cryptocurrency transactions that happen in minutes.
Cryptocurrencies and Bitcoins as an Opportunity
Other financial institutions are enthusiast by the innovation behind cryptographic money and their system called blockchain, an online record of transactions which is immune to be altered has now been explored from many players in the financial sector.
As it happened with the old ways of communication when the Internet became mainstream. Many of those who adapted survived. The same seems to happen to the financial world. This is why many institutions are involving themselves in the cryptocurrency world. In December 2017 CME and CBOE added bitcoin futures and Goldman and Sachs are thinking to open a trading desk for cryptocurrencies. It seems that we are yet in the early stages and everybody wants their cut and a seat in the front row.
Competition is Healthy
Bitcoin birth was after the crisis of 2008 as a revolution to change the way finance works. No one wants that crisis like that to be repeated. Also as the theory of evolution says adapt or die. The emerging of cryptocurrencies created a healthy competition which will improve the way we do finance. Many startups fueled by the blockchain energy are creating many FinTech products to improve money services, such as eliminating fraud speed etc. Many big institutions like Bank Of America are looking for ways to use the blockchain technology and implement it in their system.
The real threat would be to not get involved and to adapt to the new technology. At the same time, cryptocurrencies need to gain more legitimacy and acceptance form the financial institutions that could help the mass adoption. So this could be a win-win situation for both parties.