The financial phenomenon that Bitcoin and cryptocurrencies in general represent is something that is here to stay. People’s interest in this type of digital asset increased after the Covid-19 pandemic. In addition to this post they also deal with the investment in cryptocurrency.
During this time, many found the digital financial system the answer to a kind of economic lack because cryptocurrencies offer some benefits even from the comfort of home.
The sector that has been most affected is the traditional banking sector since previously, people automatically had their saved money and deposited it in banks to obtain interest rates or return rates that justified the fact of having their capital stored there.
Cryptocurrencies are the main challenge to traditional banking
Its origin dates back to 2009, the first financial digital asset created was Bitcoin. To date, there are more than 8,000 cryptocurrencies registered on various exchange platforms.
The interest has increased notably; although they are not regulated by an entity, much less controlled by a third party as in the case of banking entities that monitor the operations carried out with the legal tender currencies of each country.
The acceptance of Bitcoin and other cryptocurrencies as a form of payment worldwide has become a new economy, only more digitized, where traditional financial products such as credit cards from large companies such as Visa and MasterCard are already creating alliances with digital currencies.
Various devices function as intermediaries for processing this type of digital currency, from ATMs to applications for Android devices, where carrying out investment operations, remittances, and transfers for commercial payments is extremely simple.
Another positive aspect that the use of cryptocurrencies entails is the possibility of carrying out financial operations from anywhere in the world and executing them immediately without using banking entities.
The banking entities’ impotence is that this type of digital assets, or in many cases considered safe-haven assets, are not controlled by the banking entities, which implies that many banking commissions are not generated and much less are benefiting the Central Banks.
Bank-driven crypto investments
We have recently seen how various traditional operations are already carried out through cryptocurrencies; people are increasingly interested in learning about the proposals not only for investment but also for credit that this type of financial instrument offers the world.
The central banks of several countries are evaluating the possibility of creating their digital currencies to enter this market but are controlled and supervised by these entities from a centralized perspective.
Society, in general, is undergoing a transformation that must adapt to new technologies and the benefits that this techno-financial alliance known as cryptocurrencies and the blockchain offer to a globalized world.
We have recently heard about a possible project that the United States Government intends to promote with the creation of a digital dollar. Still, there are already two projects that lead to this type of proposal to digitize the nations’ finances and economy. They are the Digital Yuan of China and the ekrona of Sweden.
Digital currencies could bring various benefits to world countries since, after the pandemic, many of the banking processes were digitized, and users of the traditional financial system have already been adapting to what digitized finance represents.
Banking entities are evaluating the possibility of capitalizing investments based on the price of digital currencies such as Bitcoin and Ethereum, which are the ones that, to date, have proven to remain firm and positioned in the market.
Another proposal is that banks could offer the possibility of acquiring or selling cryptocurrencies through them; that is, financial entities could begin the management of crypto assets.
Could the end of traditional banking come?
The traditional must cease to be, become digital and transform to users’ needs.
It could be considered the critical point so that the banking sector does not remain as a regulatory entity but becomes involved in a dynamic economy that has evolved from financial aspects.
The Central Banks fear what the management of cryptocurrencies could imply since many are using these tools. Still, the creation of digitization projects of traditional and legal tender currencies will undoubtedly bring a new Era to the economy.
Conclusion
Digital currencies and traditional banking may not get along since they offer products and services from a completely different systematic approach. However, it will not take long for both to merge for the benefit of their users.
