Cryptocurrency
The finance industry has been greatly impacted by the introduction of cryptocurrencies. They enabled digital currency to be included in financial markets and ceased centralised money transfers.
Despite the initial resistance from banks and governments, the use of crypto is becoming more prevalent. As a result, government-backed digital currency, private initiatives, and potential collaborations between cryptocurrency and banks have emerged. These alterations indicate the direction in which online money and banking are headed.
Commercial banks are hesitant to fully integrate with the cryptocurrency ecosystem due to its volatility and lenient regulations, which do not align with their strict frameworks.
Emerging markets like India, El Salvador, and the Central African Republic are more accepting of digital currencies, while developed countries like Europe and North America remain cautious. Some financial corporations offer investment opportunities in ETH and BTC as future ETF contracts, while others await SEC approval for BTC spot ETFs.
Despite the challenges of adopting crypto in the banking sector, pioneer banks like Goldman Sachs, BBVA, and the UK Government have made efforts to integrate cryptos into their services. Goldman Sachs launched its first crypto trading desk in 2021, offering multiple currencies for trading.
The bank also collaborated with the European Investment Bank to release a $100 million digital-based Eurobond in 2022. BBVA introduced its crypto trading platform and custody services through its Swiss branch, initially offering BTC as the only available cryptocurrency. The UK government has also passed a law regulating virtual money financial trading and expressed a willingness to invest around 100 million GBP to promote a secure crypto environment.
The collapse of US banks like Silicon Valley Bank, Silvergate Bank, and Signature Bank in early 2023 led to confusion in the financial landscape, particularly regarding the adoption of decentralisation. Some failed banks were also involved in cryptocurrencies.
The US Securities and Exchange Commission is attempting to regulate digital money trading, but crypto enthusiasts oppose this as it would subject digital currencies to centralised authority and rules, contradicting decentralisation.
The privacy feature of blockchain transactions raises concerns about illicit activities, while banks use strict KYC protocols to counter money laundering. As a result, cryptocurrencies and banking sectors are competing in terms of services and fundamentals, requiring significant effort to find common ground.
Cryptocurrencies have significantly impacted global financial systems, with some banks and governments adopting them after years of rejection. However, there is still a fundamental contradiction between the two concepts and the massive adoption of cryptos in the banking sector remains a long way away. Current efforts are preliminary, waiting for significant integrations that change global financial system dynamics.
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