In this past article I said that one of the reasons why Bitcoin price was going down was the fact that there were big calls for regulations in India and South Korea. These calls for regulations largely come from financial institutions that do not like the cryptocurrency systems.
In the US there is something similar as the large US banks are very much afraid of crytpocurrencies, especially Bitcoin since it is the strongest one at the moment and will most likely remain so for a long time.
Why is that?
Everyone that takes an objective look at money in general will understand the importance of the banks. Whenever banks are targeted and their profits might be lowered by anything, they react. Bank Of America already did so and in a filing declared:
“Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.”
It was also added that this would “negatively affect our earnings” or “the willingness of our clients to do business with us.”
Basically, this says that cryptocurrencies can cause people to not want to use the services of banks, which is something that will surely happen if crypto keeps growing and banks do not adapt. However, the fear that banks have do not necessarily come just from that. There are different reasons that could be mentioned, including the important ones I will talk about.
Cryptocurrencies Are Transparent
Banks are definitely not as transparent as they might like you to think. There was recently a case in which the US Federal Reserve did not allow independent audit of the balance sheet, which is $4.5 billion. People lose trust when they see that transparency is so low.
With blockchain technology all transactions are logged and users can easily see the entire digital ledger. At the same time, cryptocurrencies can be a hedge against price inflation for assets, which is in part created by main country banks. Since Bitcoin value went up from $700 in 2014 to the huge price now, investors can use cryptocurrencies as a store of value with complete transparency. This is not possible with a bank.
Eliminating The Bank As An Intermediary
This is definitely one of the biggest fears banks have in regards to cryptocurrencies. By definition something like Bitcoin eliminates banks as intermediaries. Every single person in the world can open a Bitcoin account but for bank accounts you need to go through strict regulations. When banks are not intermediaries, they do not make money. What do companies do when they lose profits? They react and if profit drops are high, fear settles in.
Banking System Disruption
There is a fear that the evolution of cryptocurrencies will lead to a complete banking system disruption. While this would happen a long time in the future if it were to happen, it would make banks obsolete. Every single person could become a bank and store money in the form of digital currency. If technology evolves and crypto problems are reduced, it means that you can even start offering loans if you want to, all without legal consequences.
High Investments Needed
As crypto is accepted by more and more businesses banks end up having to react and actually adopt the needed technology to handle crypto transactions. A failure to do this would lead to banks failing.
There are different banks that already made the first steps towards adopting blockchain technology but this is only possible through huge financial investments and infrastructure changes. Many of the older, reputable banks do not want to make these investments as profits go down.
Having To Respect The Law
Last but not least, banks have to respect really strict laws. This is not the case with most of the crypto market at the moment. While it is completely normal to want to regulate this since crypto can so easily be used for money laundering and other illegal actions, this does not mean that it is regulated right now. For instance, in many countries around the world banks have to charge clients a yearly fee for the accounts opened. That fee goes to the government. With crypto this simply does not exist.
Banks Are Led By Hypocrites
Much more can be said but the bottom line is that everything relates to money. Banks are not interested in helping people, although this is what they want you to think. They want to make money as there are people that rely on banks for their personal wealth.
The reason why I say that banks are led by hypocrites is that the official statements are all about regulations, laws and so on. At the same time, Bank of America, which is one of the main forces behind the anti-crypto trend, has dozens of patents registered that would incorporate blockchain applications. There are even patents for the addition of proprietary digital wallets. This means that it is actively researching and preparing to incorporate blockchain technology while they stop their clients from buying cryptocurrencies with issued credit cards. Another example was JP Morgan’s CEO, which called Bitcoin fraud but the financial institution actually bought some important technology for crypto technology.
The Bottom Line
As some lack of knowledge and fear leads to reactions like “Bitcoin is a Ponzi scheme” or “Bitcoin is fraud”, the harsh reality is that cryptocurrencies mark the first step towards the future of money use and even banking. Banks are afraid because of the power being put in the hands of people. This means that their profits go down and many banks can even end up disappearing if they do not adapt.