What Would Be The Future for Banking in a Cryptocurrency Dominated World?

Banking has existed for centuries as the major system of monetary exchange and carrying out economic activities. Banking started out pre-first century with merchants loaning grains to farmers and other necessary items to artisans and tradesmen who needed them. Banking has evolved over time from being run by merchants and Knight Templars to the highly organized system we currently know. The adoption of bank notes as official tender is perhaps what cemented the role of banking in history and has made it the ubiquitous system that we know now. Imperfections in the system As convenient as banking was, there were imperfections in the system (These imperfections are being addressed by current cryptocurrency trading systems like the ). They (imperfections) were often overlooked and most people felt that the advantages outweighed the drawbacks. Bitcoin exchange For example, inflation was something that could easily lessen the value of money. And so, people could easily lose about half or more of the value of their money just because of changes in market dynamics and economic indices. But the banking system still remained popular regardless. Economic meltdowns and the need for a new system Significant economic events, however, would go on to magnify the imperfections of the traditional banking system. The first major one was the great depression of the late 1920s to 1930s where so many people lost their jobs and savings. It was obvious that something needed to be done about the system. But perhaps there wasn’t sufficient technology to make a difference. Today, innovations like the ethereum wallet enable us to hold value without a fear. So, everyone rode out the great depression without any significant overhauling of the banking system. It should be acknowledged that today, options are arising on the horizon. The financial crisis of 2008 (actually starting from late 2007) was upset, gave rise to questions about the inadequacies of the present system. It was on the backdrop of this that the first cryptocurrency, Bitcoin, was released in early 2009. It was designed to serve as a viable alternative to the traditional monetary and banking system. How did the Banks React Initially? Initially, the banking sector just ignored the whole cryptocurrency hype. Cryptos seemed like one of those moonshot ideas that would soon fizzle out just like the dotcom bubble burst in the 90s. About 9 years after, a lot has happened that hardly anyone anticipated. Bitcoin has gained popularity and is being used for so many transactions. The use of cryptocurrencies is safer than ever with the development of and other path-finding technologies. crypto telegram signals Beyond just being popular, Bitcoin has risen tremendously in value (although dropping at some point). And what’s more, many other cryptos have sprung up in the same time period. Some banking and governments systems on realizing the disruptive potential of Cryptocurrencies have been quite skeptical. In a country like China, the apex bank cracked down on some cryptocurrency exchanges. However, in countries like the Netherlands and some Nordic countries, the government has been more receptive. Various central banks have reacted in different ways towards . crypto leverage trading Now, to our subject matter, does banking have a future in a cryptocurrency dominated world? On the surface, the answer appears clearly to be no, for the following reasons. : Cryptocurrencies majorly run on a decentralized system where the blockchain allows individuals to securely carry out transactions with each other independently. Unlike the current system where your finances are stored in a bank with which you have a bank account and through which you run transactions. Middlemen become obsolete Cryptocurrencies do not need any entity to hold your money. It’s all held for you on the cloud through the blockchain technology. This is one reason why it might seem that banks will disappear in a cryptocurrency dominated world. : Cryptocurrencies’ biggest moments were in the year 2017 when an unprecedented boom in the price of the major cryptocurrencies occurred. Cryptocurrencies are volatile This bullish behavior attracted a lot of attention and new interest. There was enthusiasm all over with highly optimistic predictions that prices would go even higher in 2018. But to everyone’s dismay, 2018 came and it was a completely different story as shown in the charts below: Bitcoin price between 2017 and 2018 Source Ethereum price between 2017 and 2018 Source This volatility and unpredictability in price and value make cryptocurrencies a very unlikely candidate as a fiat money replacement. The banking system is more used to the relative stability of fiat currencies and cash. Although changes in value occur in banking, they are not as unpredictable as cryptocurrencies. Therefore, in a world dominated by cryptocurrencies, banks will be unable to handle this level of volatility and ultimately have to close shop. Does this mean all hope is lost for banks when cryptocurrencies eventually take over? (as is being predicted by some experts). Not necessarily. There are a few conditions under which banks may be able to keep up and actually play a role in a cryptocurrencies dominated economy. Banks need to be willing to ditch their traditional operational methods and adopt a more fluid role. It is necessary to become forward thinking and adopt the use of blockchain technology even in conducting their present business. If banks want to thrive in a cryptocurrencies dominated world, their roles will have to be similar to those of coin exchanges. Evolve: Presently, the major cryptocurrencies (prominently bitcoin and ethereum) are more stores of value than media of exchange. It is, therefore, less easy for banks to trade or deal with them directly. However, in a cryptocurrency dominated economy, they would be valuable as media of exchange. This will make the cryptocurrencies more suited for trading and dealing by banks. Hopefully, when a middle ground is established, banks will find a role to play in a crypto-dominated world. Cryptocurrencies will have to change: How does this affect you as a banker or bank owner with an interest in cryptocurrencies? What should you do based on the information presented here? From all indications (volatility of cryptos and current technology), Cryptocurrencies are not going to dominate the global economy just yet. They still have a long way to go in stabilizing and gaining wide acceptance and the approval of governments. Hedge Your Bets: However, this does not mean you should totally ignore the possibilities. Keep your eyes opened about little ways in which you can incorporate crypto tech in your business. It may not be wise to completely ditch your current business pattern and focus on cryptocurrencies. The important thing is to adopt little changes that will keep you in tune with current trends and prepared for the future. What Should Governments Do? The blockchain technology is here to stay. Governments can be strategically positioned to play by the rules and issue national currencies in this regard. This is the way that seems right going forward as the evolution of crypto is yet in its beginning stages. Last Line A futurist was once quoted to have said: ”In the future, there will be no banks.” While this statement looks trite, it might not be so simple to get to that standpoint. Banks that evolve along with the crypto denouement will not lose out in the marketplace. However, it is obvious that traditional banking will be eroded more and more, as we go into the future.