The impact of cryptocurrency is going to be long-term without any doubts. Cryptocurrencies may minimize or eliminate the need for regulated intermediaries. It can enable users to send money faster without paying additional transaction fees. Moreover, cryptocurrencies can offer additional funding sources for businesses and individuals.
The current impact of cryptocurrency on banking is still nascent and minimal. This is because most banks are reluctant to invest in cryptocurrencies. Limited regulations and volatility prevent many banks from dealing with cryptocurrencies. Regulatory and compliance complexities are preventing many banks from dealing with cryptocurrencies. This is because many cryptos are subject to different legal regulations and frameworks across regions and countries. Sometimes, it creates uncertainty for banks too because of jurisdictional differences.
Silvergate Bank collapsed because of its wrong policies on crypto investments. However, not all banks have a hostile attitude towards cryptocurrencies. Some banks, however, show more eagerness while dealing with cryptocurrencies. Some non-banking financial institutions are now offering crypto-related services. Many cooperate during crypto transactions by using blockchain technology. This is because an increasing number of banks are realizing that cryptos cannot be ignored. These activities are becoming a common practice in developed regions such as Europe and the US.
Cryptocurrencies can allow users to transfer money from one crypto account to another from different countries. This can lessen the burden on many banks. Cryptocurrencies may reduce the need for opening many bank accounts. It can also minimize the need for wire transfers, payment cards, and remittance services. Moreover, cryptocurrencies may bypass the need for traditional intermediaries and credit cheques. It can easily become a leading source of loans and funds. This in turn may compel banks to lower their interest rates for lending.
Cryptocurrency will have a positive impact on present-day banking services. However, some of the changes can be disruptive. The main benefit of cryptocurrency banking is that it permits consumers to use digital coin balances. Ordinary users can use these cryptocurrencies to carry out both purchases and withdrawals. There are crypto debit cards that operate like prepaid debit cards. Cryptocurrency exchanges need individuals to create individual accounts or have digital wallets to procure a crypto card. Some platforms need users to validate one’s identity. Know Your Customer (KYC) verification processes are mandatory in many places to make crypto exchanges safer.
The banking sector may benefit from cryptocurrencies because of both collaboration and innovation. It is a fact that cryptocurrencies may offer many scopes to banks that are willing to leverage and adapt to the changing times. It may improve operational efficiency, product offerings, and customer services. For example, if most banks switch to blockchain technology, then the speed of operations will increase. It will improve customer service and product offerings. Banks can increase their customer base by introducing or allowing cryptocurrency transactions. This can materialize only if banks collaborate with cryptocurrency platforms and providers.
In many countries of the world, a large section of the population does not have access to banking services. This is because traditional banking services do not have enough resources to provide services. In some places, the unbanked population does not have enough financial resources or knowledge to open a bank account. Many banks intentionally exclude certain classes of customers from banking services owing to geographical remoteness, low income, etc. However, cryptocurrencies can change this reality by allying with banks. Similarly, banks can provide cryptocurrencies to the unbanked population and increase their customer base. This can be mutually beneficial for all.
In 2021, Goldman Sachs formally adopted cryptocurrency by launching a cryptocurrency desk in their branches. The bank’s CEO aims to expand the bank’s market presence by accepting crypto trading institutions. The company also has launched a software platform that leads to real-time cryptocurrency prices. It also periodically provides news to its customers.
UBS is the world’s largest private bank. It has realized the importance of blockchain technology and cryptocurrencies. The bank now offers digital bonds. These bonds can be settled and traded on both cryptocurrency blockchain-run platforms and traditional exchanges. It helps investors to invest in digital bonds irrespective of whether they have the needed blockchain infrastructure. UBS is also focusing on removing barriers to using innovative technology to simplify bond issuance.
BBVA is the first international bank that offers crypto asset services in Spain. It also provides end-to-end digital asset management such as stablecoins and tokens. It is indeed useful for crypto investors who want to use these as part of their portfolios.
Also Read– How can Blockchain Benefit Small Businesses?
A phase will soon come when most banks will adopt cryptocurrencies. This is because the credibility and acceptability of cryptocurrencies are internationally increasing. Furthermore, banks are also realizing the advantages of using digital currencies as an alternative medium of exchange. Some cryptocurrencies such as Bitcoin are rapidly expanding. The banks cannot ignore its rise for a long time. Therefore, banks may try out implementing a decentralized ledger to improve their offerings.
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