Traditional finance is generally considered the opposite of Bitcoin and cryptocurrencies. However, there must be a coincidence between the two worlds. The retail market was the driving force of the bull market in 2017-2018, and the current one will be driven by institutions.
Banks are forced to adapt
Our monetary methods are outdated at best. No one is more aware of this than those who work within them. They need a huge overhaul and you can achieve this with the help of Bitcoin and the digital revolution.
Now we see how important players in the standard financial sphere are beginning to realize this paradigm shift. Morgan Stanley is considering betting on Bitcoin with its $ 150 billion financial arm. BNY Mellon and Deutsche Financial are engaged in storing cryptocurrency. And JPMorgan admits it has to be connected to Bitcoin. Banks show curiosity, driven by their customers, see a hole in their provision of services. After all, it never occurred to the banks that they themselves were now an excessive danger.
Satoshi Nakamoto described the Bitcoin community as “a purely peer-to-peer model of digital money that will allow online funds to be sent directly from one person to another without going through a monetary institution.” This clearly excludes monetary institutions from the goals of the Bitcoin digital asset revolution.
If Bitcoin is anti-establishment, what happens when it joins the crypto space?
The participation of monetary institutions is not a basic requirement for the success of the crypt. In fact, decentralization is one of the key advantages of Bitcoin. However, institutional participation will accelerate acceptance and accessibility for abundance.
This synthesis of cryptocurrency and the mainstream financial system towards the future of money is something we should all be paying attention to. This is a big picture of the future.
To achieve this, banks need to go through a steep learning curve, and cryptocurrency and DeFi provide exactly this learning curve today. Banks that try to use the opportunities of cryptocurrencies will gain the trust of their users, especially in the era of digitalization. And those banks that are afraid of the unknown will disappear forever. Resistance is useless, and the time of doing nothing with cryptocurrency was two years ago, not today.
Institutional implementation can also be beneficial for the market. With the help of traditional financial companies, crypto companies can have additional influence over regulators and, therefore, have a better chance of creating a regulatory framework that is largely workable and adapted for the crypto industry.
When the Office of the Comptroller of the Currency in the United States (OCC) confirmed that national banks can store crypto assets, this was a major improvement. Once this service becomes widely available, traders can ask their current money service provider to store all their wealth in one place if they want to.
The entry of huge monetary institutions into the cryptocurrency, in particular, through the purchase, sale and storage, will increase the legitimacy of the market. Observing the buying and selling of Bitcoin by State Road or JPMorgan, may encourage many people to explore this area on their own. While many will agree with a third-party provider, some will discover the possibility of self-service, and learn to fully manage their own funds.
The involvement of the standard financial sector will lead to a wider acceptance of cryptocurrency firms by banks, which will improve access to account opening. This will provide an opportunity to add additional storage capabilities to the market, and increase additional competitiveness. This can lead to additional entry choices from companies you may have already established relationships with, and options tailored to your dangerous appetite for crypt, or concerns.
If conventional monetary institutions are able to facilitate the purchase and sale of cryptocurrency, they will build a supporting infrastructure for the blockchain ecosystem. This can allow new traders to enter the market, demonstrate higher liquidity and opening value, contribute additional money to the area, and drive additional improvements. This cycle of optimistic proposals will lead to the overall development of trade and eliminate a number of supposed entry boundaries.
At the same time, the introduction of Bitcoin and cryptocurrency will alleviate a number of shortcomings of traditional finance, which should lead to trade reform and improvements in the interests of firms and buyers.
Currently, customers incur a large number of costs when depositing their cash: processing fees, bank card charges, ATM withdrawal fees, overdraft fees, and inactivity fees. Regardless of these fees and costs, the system does not allow you to make payments around the clock and seven days a week.
Crypto transactions will be verified and calculated almost immediately. They will not be cancelled (to avoid chargebacks), and will have minimally aggressive fees compared to conventional money institutions and fund providers.
Conventional finance requires clunky connectivity, repetitive “know your customer” (KYC) requirements, and funds are now untraceable once forex is withdrawn from your account. Cryptocurrencies offer the possibility of an orderly KYC, a clear ledger, and direct compatibility between completely different things. Blockchain transactions will reduce the cost of connection and compliance, as well as provide round-the-clock access from anywhere in the world.
The rise of DeFi and CeFi
Decentralized Finance (DeFi) provides an additional accessible and clear structure for cash providers, without intermediaries. While some attention must be paid to the dangers of a lack of regulation or oversight by third parties, an innovation should not be abandoned, after correcting the shortcomings in which the restoration of monetary production in this way will be revolutionary.
DeFi provides quick and easy access to C2C lending, high-interest income tasks, and placing bets for returns. All this allows you to be curious about your financial savings, so that your money and possessions are right for you. DeFi allows you to trade an asset for an asset 24 hours a day, 7 days a week, at no great cost, which is currently used by every interested user in the ecosystem. There are no delays caused by the need to express your funds in US dollars for settlement, to convert at the exchange rate, or to depend on the opening hours of your financial institution.
The nature of the decentralization of each DeFi task varies from protocol to protocol. Some, such as Dharma, used centralized financial flows and centrally offered liquidity. Others, such as Compound and Maker, have centralized management of interest rates and platform enhancements, but are managed by a DAO (distributed autonomous group).
Conventional finance will no doubt want to be complementary to the CeFi spectrum, while retaining the centralization component (clearly, a centralized DeFi system is pretty much an oxymoron.) Perhaps they will use authorized or so-called enterprise blockchains, rather than a public blockchain such as Ethereum.
DeFi in the long run may be slightly different from the DeFi we know today. However, the ideas and underlying experiences cannot be ignored. Conventional monetary institutions may want to take over certain components of the DeFi infrastructure so as not to be left behind. DeFi provides traditional finance with an entirely new strategy to deliver monetary goods, reduce prices, restrict access, and diversify its revenue streams. This is something that is not and will not be in the traditional system of finance.
Crypto purists have long experienced justified distrust and skepticism towards the current monetary system and the major players within it, which is largely reflected in the views of traditional finance on cryptocurrency. As the two ecosystems move towards convergence, the main goal should be to collaborate to symbiote and improve the existing systems. And no other way. Crypto is about to get the opportunity to make changes, and turn the existing monetary system on its head.
Monetary institutions and standard markets may eventually find that they are much less important, but they will still have to adapt quickly to this rapidly evolving ecosystem.
Each of us builds our own personal financial security in the long term, and, as sarcastic as it may be, most likely, these will be standard monetary institutions. They will try to take on the role of helping them develop and apply our cryptocurrency exit techniques to avoid conventional financial systems.
Remember how, at the end of 2020, the Central Bank of England said that commercial banks should deal with the threats posed to them by digital currencies themselves, leaving them with little choice: adapt or disappear.
But in all this, there is one small nuance: you need to understand the differences between cryptocurrencies and digital assets. One can completely exclude the other. Everything will depend on the final goal. For example, think about the digital yuan and the fact that Bitcoin is banned in China.