Cryptocurrencies VS Banks. Is coexistence possible?
Why is a cryptocurrency system dangerous for banks?
Recently, the growing confrontation between traditional financial institutions and the cryptocurrency market has become more and more obvious. The largest banks in the world harshly criticize Bitcoin and other digital currencies for their insecurity, high risk, volatility, and excessive anonymity.
Cryptocurrencies were created as a kind of alternative to the overly controlled world of traditional finance, generating an increasing concentration of capital and power from year to year in the hands of banks and financial institutions.
At its core, the cryptocurrency market is as close as possible to perfect competition. Such a model assumes free exchange, carried out without extra-economic coercion, at the request of the interacting parties.
It is obvious that the development of the cryptocurrency market in such an unregulated and uncontrolled form is simply unprofitable for states and banks and is perceived mainly in a negative way.
You can easily understand why politicians and bank owners dissuade people from investing in cryptocurrency. After all, this will bring them loss, ruin, and loss of total control over our money. That is why banks, financial institutions and the policies of many countries prohibit cryptocurrency.
Banking system weaknesses
High intermediation costs and slow transactions.
Worldwide, the average cost of a money transfer is 7.01% of the transaction fee, and when using banks, it increases to 10.53%. These transactions can take several days, which seems completely unnecessary in the modern digital age. If a person has access to financial services, sending and storing money should be inexpensive and fast.
Low confidence in financial institutions and governments
The financial sector is the least reliable business sector in the world, with a confidence level of only 57%.
Currency manipulation and censorship
In a centralized system, countries have the right to manipulate and depreciate fiat currencies, and this can have devastating effects on markets and the lives of citizens.
Systemic risk escalation
With financial power concentrated with only a few financial institutions, such as central banks and companies, this means that one major failure can ruin the entire system.
Let’s consider the advantages of blockchain technology in comparison with bank transfers:
Using the traditional banking system, which people use every day, for example, you decide to transfer money to your relative who lives in another country. To transfer between accounts or from card to the card you will have to:
- Spend time to get to the nearest bank branch.
- 2. Present a passport or other identification documents.
- 3. Fill in all the relevant paperwork for the transfer and sending funds.
- 4. Pay a fee for the transfer and currency conversion.
- 5. Wait for confirmation of the operation, time for transferring funds within a few banking days.
- The bank may refuse to transfer funds for one reason or another. In this case, all your efforts and waste of time will be wasted. Of course, in a one-time case, nothing bad will happen. You can spend your time, pay a commission, etc. And if such transfers need to be done on a regular basis? Or if you are a businessman who needs to transfer a large sum of money to a business partner? In this situation, banks create huge inconvenience. Since you will not only have to pay a significant percentage of the commission, fill out a lot of papers but also expect some period of confirmation of the application for the transfer of funds.
And now let’s take a closer look at how financial transactions with cryptocurrency occur.
- First, you get fiat money on your bank card or any online wallet.
- 2. Register a cryptocurrency wallet using KYC and AML to maximize your financial security in the future.
- 3. After successfully registering and performing all the actions, you will receive your private address in the form of various numbers and letters. It is necessary for both storage and subsequent transfers of cryptocurrency.
- 4. You exchange your money for cryptocurrencies using a cryptocurrency exchanger. For example, buy coins on the BitXmi exchange.
- 5. Then transfer it to your online wallet using the previously received private address. After that, the system will process the payment and transfer all the coins to your balance.
- On this, the entire financial transaction for the purchase of cryptocurrency is completed. You can arbitrarily dispose of your purchased cryptocurrency, no one but you will have access to it. You can trade cryptocurrencies, store them on your wallet or transfer to relatives who live on the other side of the planet.
As a result, we can draw the following conclusion about the work of the entire banking system: this structure, in fact, is an unnecessary third party in a transaction between people and only complicates all financial transactions.
What awaits the global financial system?
The world financial system has many weaknesses and it is beginning to become obsolete. It is being replaced by a decent alternative – cryptocurrencies.
The cryptocurrency market capitalization is growing from year to year. Banks, states and society as a whole will go through all stages of the adoption of the inevitable, realizing that it is impossible to stop the free exchange of goods, as well as scientific and technical progress.
How can banks stay afloat in this situation?
Banks and financial institutions are clearly not able to defeat cryptocurrency protected in decentralized networks. In the conditions of the rapid development of blockchain technology, banks should radically simplify and speed up operations, reduce bureaucracy, and reduce fees. With the spread of Internet access, as well as the development of decentralization technologies, it may be possible to build a completely new financial system.
Technically modern cryptocurrencies are also far from ideal. For example, they are extremely volatile. This is convenient for cryptocurrency exchanges and traders who trade on them. The BitXmi team offers everyone to join the global technology of the future, remove intermediaries between financial transactions and earn on cryptocurrency volatility with us.