Today’s realities do not give grounds for claims that Bitcoin threatens the banking system. And it is unlikely this may become possible in the future. It will take many years to develop the cryptocurrency ecosystem to the point where it becomes a real competitor to the current banking system. After all, the strength of the existing global economic system at this stage is indisputable.
Therefore, it is safe to say that the next few years will not be marked by the beginning of serious “combat” actions between the existing and future systems. In other words, we should not expect that in the short term, virtual money will be used to destroy the capitalist banking system.
The future of Bitcoin is seen in a different plane. Grateful users will be people whose place of residence is in developing countries, where the opportunities to use the services of financial institutions are limited. For commercial banks, such countries are not of interest, since it is not profitable for them to open their branches there. This is due to the complete lack of effective demand.
Residents of many countries do not have the opportunity to pay tens of dollars to the Bank to open a personal account there. There are, of course, ATMs and mobile banking, but the amount of Commission fees in them is so high that many people simply cannot afford this service. For example, the average African user of the M-Pesa system is forced to lose up to 10% of their own earnings on Commission payments.
It is in such countries that Bitcoin has a good chance of becoming a full-fledged means of payment. And this is quite realistic, given the weakness of the banks ‘ positions. Already today, there are structures that can become a favorable environment for the development of virtual currencies. There is an active development of various applications for valets, as well as services that help facilitate the use of Bitcoins.
What are the goals set by Bitcoin and banks today
Analyzing a large number of articles written by economists and bankers, as well as interviews given by them, we can conclude that they did not manage to understand the essence of Bitcoins. They did not want to burden themselves with considering the fundamental changes that virtual money technologies can bring to the financial world. They are driven solely by fear of any innovations and Terry conservatism.
The Central banks of China, Austria, India and France have repeatedly stated that cryptocurrency is an unreliable financial tool. The main argument put forward by them is that a currency that cannot be controlled by state authorities cannot be relied on. And banks use all possible means to convince users to stop using virtual currencies. What drives them? To answer this question, we will have to look at the evolution of the financial system.
What should you do in the place of a competent investor interested in asset diversification? Everyone knows this — you should search for assets that are minimally affected by existing ones. After all, putting “eggs in one basket”, you can suffer significant losses if the Issuer goes bankrupt or the stock index sinks. In other words, you should choose an option that can cover losses in the event of the collapse of another project.
These requirements are fully met in Bitcoin. This currency is in no way dependent on any state and is used all over the world. This makes the cryptocurrency protected from the effects of deflation, devaluation, and hyperinflation. And if any negative news causes users to panic start throwing off the weakened currency, the Bitcoin system will only benefit from this.
Now “let’s go back to our sheep”, that is, to the banks. Speaking about the unreliability of virtual currencies, banks primarily point to its volatility. But is it only cryptocurrencies that are subject to it? What about bonds and all types of stocks? To be honest, any assets are not immune to price volatility, and this is always taken into account in advance by investors. And you can find a large number of examples of this by carefully studying the entire evolutionary path of the financial system.
For example, you can talk about Apple shares. Their starting price did not exceed $100, but then it rose sharply to the level of $700. This was followed by a decline to $400 and another increase to $600. Bitcoin prices fluctuated in much The same way if you look at their history throughout 2013. The only difference is that the changes were much faster, and this was due to not so much friction and disagreements in the course of trade.
To the delight of all supporters of cryptocurrencies, the Central Bank stopped receiving accusations of actively using Bitcoin for money laundering. It seems that the regulators agreed with the argument that cash, rather than virtual currencies, is more often used to conduct criminal schemes.
Should banks be afraid of Bitcoin?
Wavering people can’t see beyond their noses. It is for this reason that when any negative rumors of this kind appear, speculators immediately rush to throw off all their assets related to this area. They justify their actions by trying to avoid financial losses. Such a panic can be triggered by the Bank’s position, which is interested in a sharp drop in prices, and this has been repeatedly confirmed.
However, the long-term outlook for Bitcoin is considered very favorable by many. And information that reflects the true state of things is becoming more and more accessible to a large number of users. And thanks to this, the number of adherents of cryptocurrencies is constantly growing. And the black PR conducted by the financial world sometimes plays against it.
What steps should be taken by the banks and Bitcoin
First, in order for the criticism from the banks to look competent, it would be good for them to understand the essence of this system. Today, the reputation of these financial institutions is severely damaged due to the clearly demonstrated ignorance and basic ignorance of the situation. To avoid such flaws, they should:
- Study the technological features of developing cryptocurrencies.
- Understand potential risk factors.
- Analyze the situation with the speed of the world’s adaptation to alternative currencies.
Secondly, it would be very good if the relationship between banks and Bitcoin prevailed honesty. Then everyone would agree that alternative currencies are an inevitable stage in the evolution of the world’s financial system. And maybe then bankers will hear the warnings of the futurist Kurzweil.
Third, bankers should start working with cryptocurrencies. If not all, then at least with such advanced ones as Bitcoin or Litecoin. At the same time, banks should open their doors to virtual currencies, which can allow for more productive use of the forces used to combat them.
Banks would benefit from a deep analysis of the mistakes that many large corporations made in the recording industry at the time. An incorrect assessment of Internet technologies led to the fact that they could not compete with them and collapsed.
Financial figures can be offered as an example of Apple. Its management promptly and correctly assessed the prospects for downloading music in digital format. Analysts correctly noticed the beginning of changes in the mood of consumers, who very quickly cooled down to the old technologies. As a result, the company made significant profits by creating its own unique product and its accompanying ecosystem.
In order for banks to offer their clients services using Bitcoin, they will have to agree to maximize the mobilization of all their capabilities and resources. If they do not do so at the right time, they may simply become an unnecessary figure in the global financial services market.
Banks can provide the following Bitcoin services:
- Opening Bitcoin accounts.
- The organization of the Bitcoin safe.
- The ability to obtain loans, as well as loans in virtual currencies.
- Organization of insurance services in Bitcoins.
- Conducting exchange operations in a virtual currency/fiduciary pair.
- Creating e-wallets linked to Visa, Amex, and MasterCard.
- Implementation of programs — virtual wallets that are sharpened for the smartphone OS.
- Installation of Bitcoin terminals for the convenience of users.
- Creating a network of ATMs that support cryptocurrencies.
- Linking physical wallets to the Internet.
The availability of such services will allow banks to cooperate with users who do not have sufficient technical training, and therefore have a need for expert advice. The main thing is not to raise the bar of Commission fees too high, getting enough profit due to the number of customers. Such actions will allow banks to convince people that they are not lagging behind the evolutionary processes in the financial system.
Reasons why banks should not create alternative currencies to Bitcoin
Specialists of JP Morgan Chase, not the last Bank in the world, are trying to create an individual cryptocurrency that is competitive with Bitcoin. If this experiment is successful, a virtual currency should appear that is fully controlled by the Bank.
But it is unlikely that customers will recognize this situation as ideal. The presence of control over the transactions carried out can be regarded as a nuisance of the regulator. In addition, the process of creating an alternative currency is not easy and requires a lot of time.