Even though cryptocurrencies are spreading in every corner of the world, the traditional banking system has not been ultimately used to it. Yes, the main reason why the different banking systems of the world or not adapting the bitcoins and other crypto coin is their hesitation. They believe that cryptocurrencies are not the right thing to be adopted in the system of every nation. Therefore, the banking system needs to understand the impacts of cryptocurrencies on the banking industry altogether. If it is going to have a positive impact, they should go for it, but if it is not the case, they should avoid it altogether. The banks are scared of cryptocurrencies because they believe that the inherent risk will outweigh the potential benefits of the crypto coins.
The extreme volatility of cryptocurrencies is one of the most important reasons the banking system is highly impacted. Not every government in the world is against cryptocurrencies, while some are also in favour. El Salvador is the only country in the whole world to accept BTC as legal tender. Some other countries may be willing to do what El Salvador has done with the BTC to support their declining economic prosperity. They believe that if bitcoin is involved in the financial system, it will help in helping the economy up than it has always been before. However, some banking organisations of the world do not believe the same. Even the international monetary fund doesn’t support bitcoin from crypto market as a legal currency in any world nation. They are also given warnings to El Salvador to put down the idea of accepting bitcoin as a mode of payment in the whole country. Well, today, this is not talk of discussion. We are here to understand why banking organisations are having an impact on cryptocurrencies.
Why are banks scared?
Recently, a study was conducted by the Association of certified anti-money-laundering specialists, an organisation based in the UK. According to it, about 63% of the people working in the banking industry believe that cryptocurrencies are riskier and that banks should not use them legally. Well, it came because of several reasons. Some of the most important reasons because of which the above assumptions are given are as follows.
- The decentralised nature of cryptocurrencies has been an important matter of concern for the banking industry. They believe that as the cryptocurrencies and their prices are not controlled, they will create a lot of fluctuation and complications in the whole system. So any government, bank, or agency that tries to add on the bitcoin in the system will face a lot of complications, which is not something simplified very quickly.
- Know your customer is a policy adopted by the banking industry these days. In this method, every bank knows about their customers entirely as they have to conduct security checks from time to time. However, cryptocurrencies eliminate any such thing. To make a transaction in the crypto currencies, no one has to verify their identity, and they can work completely anonymous. The cryptocurrency is a peer to peer medium of transaction, and therefore, they eliminate the banking system. If this thing continues and banks adapt cryptocurrencies as a payment medium, they will face serious problems. They will not be able to keep an eye on the customers, and therefore, the security concerns will be greater than ever before.
- Even if the banks want to accept cryptocurrencies, especially bitcoin, into the system, they cannot do so because of the volatility. It is because bitcoin prices keep changing over a short period, which has happened in the past. Because of this, the market size, number of market participants, and liquidity are highly affected. Therefore, the banks are scared that it will affect the financial sanity of the whole banking industry.
Even though there have been some critical methods like custody services, easy onboarding, expert assistance, security concerns through which the banks can enter the world of crypto coins, they cannot do so. They are scared of doing so because of the negative fact of using cryptocurrencies. They cannot compromise the security of their users just because they want to adopt the new technology. Therefore, cryptocurrencies are not being included in the banking industry soon.