09 Jun The complex relationship between crypto and the banking sector
Back when cryptocurrency originally emerged, it did so quietly. The news did not take long before it started to spread, but even that took a long time to happen. It only emerged in its full glory in 2017, thanks to the Bitcoin bull run.
However, while many are only focusing on the prices, there are still plenty of people who remember what the arrival and continuous advancement of cryptocurrencies mean for the systems we have been using so far.
The crypto sector is extremely disruptive, and it will change nearly every industry out there before it is done. However, it is worth remembering that its goal, the point of its very existence, was to disrupt the financial industry — and especially the banking sector.
Crypto vs Banks
As many likely know, cryptocurrency was invented because of the banks. When banks misused their authority to satisfy their greed, they caused a financial crisis that struck the whole world. Bitcoin’s creator, Satoshi Nakamoto, decided that the banks have too much power and that they are not trustworthy enough to use it.
Of course, he did not go around robbing banks in revenge. Instead, he created a better system that will eventually attract people away from the banks. In other words, Nakamoto decided to make a system that is more efficient, more attractive, and much cheaper. After that, all he needed to do is wait and watch as people leave banks for his Bitcoin on their own.
This already started to happen a long time ago, and while it keeps going slowly, it is still happening all the time.
However, the banks themselves started to realize this. At first, they did not take the crypto industry seriously, but that started to change over the years. Right now, they are, in fact, taking cryptos very seriously, although they keep taking different approaches to handle them.
Indian central bank, for example, introduced a crypto ban (which has since been lifted by the Supreme Court) which forbade any bank in the country to work with crypto or provide services to crypto businesses and users. Chinese central bank started developing its own cryptocurrency, deciding to ride the crypto wave, instead of fighting against it.
The UK central bank remains curious but cautious, while the US central bank keeps pretending that cryptos don’t exist.
Can cryptos and banks coexist?
While the initial idea of cryptos attracting people and drawing them away from the banks might seem like a good one at first, many have started questioning it. Banks have been around for ages, and they won’t give up without a fight.
While many of them were corrupted by greed, and they did make wrong moves, they have certainly paid the price.
Now, with the crypto industry flooding the financial markets, many of the banks understand the need to adapt in order to survive. This is why they started exploring cryptocurrencies, partnering with crypto businesses, and in many cases, even merging their businesses with crypto/blockchain.
It is worth noting that Ripple Labs, the company behind the third-largest cryptocurrency, XRP, already partnered up with hundreds of banks to offer its payment solutions. Solutions that utilize cryptocurrency, no less.
The partnerships make sense, after all. Banks are getting the ability to send any amount of money anywhere in the world in mere seconds, which is a lot faster than what their own technology can handle. In exchange, XRP and Ripple get usage and exposure, which is especially important for their survival and for securing their future, especially now, as the crypto industry is still trying to ‘find itself.’
There is still a long way to go before banks become comfortable with crypto. There is still a lot to do before many of them even consider approaching them without hostility. But, there are some pioneers, such as Revolut or National Bank of Canada, that are giving good examples.
JPMorgan is also a good example of an American bank that created its own token, JPM Coin.
The crypto space is new and complicated, and there is a lot of competitiveness right now which will result in the death of most altcoins someday. Meanwhile, in the banking sector, some companies realize that the emergence of crypto means that things will have to change for them, forever. There is now new technology that will make sure that happens.
Some banks have already started accepting it and embracing crypto. Others are still fighting against it. This sector will see a similar cleansing as the crypto industry itself, and while it will undoubtedly see many of the banks disappear due to their refusal to evolve, others will remain, and continue living in collaboration with crypto.