5 Reasons Traditional Financial Institutions Do Not Like Cryptocurrencies
Cryptocurrencies have changed the landscape of the financial industry in a very short period. Even though they didn’t get much appreciation in the initial days, today cryptocurrencies have gotten a wide acceptance. The numbers of cryptocurrencies are increasing day by day and it is expected that future transactions will be in cryptocurrencies.
As a result, most of the banks and traditional financial institutions are going to face a lot of problems. Because there is a threat to the traditional currencies due to the cryptocurrencies. But the banks and financial institutions are beneficial from the traditional currencies. In this article, I am going to share what are some reasons for which traditional financial institutions do not like crypto.
1. The Size of Crypto Market Exceeds Large Banks
In 2018, the size of the crypto market exceeded the largest bank of the USA, JP Morgan Chase in terms of market capitalization. Only Bitcoin’s market capitalization exceeds the market capitalization of many Chinese banks. Again, Ethereum also exceeds the market capitalization of Morgan Stanley.
Due to this fact, financial institutions, as well as banks, are getting heavy pressure on their operation. The growth rate of the crypto market has become a threat to the banks. So banks do not like this and they are trying to decrease the growth rate.
Some banks also restricted their customers that they can’t purchase any cryptocurrency form credit cards. This is a step by many banks to decrease the rate of growth of the virtual currency market.
2. Significant Increase in the Value of Cryptocurrencies
In 2017, the whole world got surprised by the increase in the value of bitcoin from $1000 to $20,000 which is unbelievable. Even though the value is fluctuating but the banks are facing a lot of problems with this movement. The value of cryptocurrencies is increasing because more people are investing in them. If you want to invest in cryptocurrencies then you can invest through bitcoin trader.
Recently, there is a fall in the value of bitcoin made some investors to panic. But some experts say that bitcoin is going to boom 100 times the present value. Although many bankers claimed that the bitcoin revolution was a fraud, they later realized the potential of blockchain technology.
With the increase in the value of the cryptocurrencies, banks are getting disrupted because people are attracted more towards the crypto market.
3. Decentralization Nature of the Blockchain Technology
Another major reason why banks oppose cryptocurrencies is the decentralization nature of the underlying blockchain technology. That means you don’t need a third party like banks for verifying your transactions. This is what banks strongly oppose cryptocurrency because banks and financial institutions are the intermediaries whose job is to verify and approve transactions.
This has become a major problem for financial institutions. With the rapid growth in the field cryptocurrency may take away the power of banks over money. So banks and financial institutions get scared that blockchain technology may replace them. As a result, banks perceive the crypto market as their competitor so they do not like cryptocurrencies.
Money transfer in cryptocurrency requires very less time as compared to traditional currency for long-distance (especially cross border payments). In the long run, this might take away the control of the economy from the banks which is a disruption of the current banking system.
4. The Underlying Technology is New
Many bankers also do not ready to accept the crypto market because of the underlying technology. As the new technology is a little complex, so many bankers find it difficult to understand. For that reason, they don’t like it and claim that it’s not good. They are unable to grasp the technology. Although some bankers understand the crypto market, how it works, still they do not like it.
5. Bankers May Get Unemployed
Another main reason banker hates the crypto market is that they might lose their job. With the disruption of cryptocurrencies, many banks are getting many operational and functional troubles and this might shut down their business in the future. As a consequence, many bankers might lose their job in the future. So, they don’t like the crypto market.
Hopefully, you have understood why traditional financial institutions do not like cryptocurrencies. As mentioned above, the growth in size, values, the popularity of cryptocurrencies are some potential threats to the banks. Anyway, please mention what’s your take on this.
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