When cryptocurrency such as bitcoin first hit the financial markets, no one could have expected that Bitcoin would soon be the top investment opportunity worldwide. With cryptocurrencies revolutionizing how modern day trade work, we have seen what positive and negative impacts cryptocurrency has.
As cryptocurrencies are taking over the financial world, companies, banks, and even countries are torn between the decision to allow cryptocurrency trade or not. The question is what impact will this new form of currency have on already established financial sectors such as banks? When financial transactions take place within banks all data is recorded on distributor ledgers that control the transactions.
And since cryptocurrency has no regulatory authority, it gives people the opportunity to perform illegal transactions such as weapon or drug purchases without the chance of being traced due to no ledger existing within a cryptocurrency transaction.
Experts in the cryptocurrency field say that banks and heads in the financial department do not clearly understand blockchain technology and only see the potential risks and not the benefits linked to cryptocurrency. However, a collaboration between six of the world’s largest banks is in place in order to accept cryptocurrency transactions.
The difference is they are working on a new more secured for of cryptocurrency called USC (Utility Settlement Coin). Big companies like Barclays, Credit Suisse, Canadian Imperial Bank of Commerce, HSBC, MUFG, and UBS are backing USC.
Reuters informed the public that it would be possible for consumers to convert USC into their local currency at central banks. But with banks and other cryptocurrency companies starting a more “banking friendly” cryptocurrency instead of using Bitcoin, we question what the future holds for Bitcoin. Currently, even with USC threatening Bitcoin’s future, it’s still rising in the market and the value for Bitcoin is higher than it’s ever been.
Christine Lagarde, the IMF head said at a conference in September 2017 that cryptocurrency isn’t a temporary trend but a new financial innovation that’s here to stay. Statements and reports such as this forced banks to close the gap between blockchain technology and currently implemented technology. If central banks fail to adapt regarding blockchain technology then they will become irrelevant as the flow of money will decrease tremendously.
To understand the role banks play in the financial market, you have to look at the main reasons they were created. To allow safe storage for money and to assist in financial transactions. Now with a virtual currency like Bitcoin, we have no need for a physical storage facility for money as Bitcoin is completely virtual.
So with cryptocurrency transactions and trade growth, and banks starting to look like they might become irrelevant, it also questions how strong will the governments hold on the financial world be in the near future?
As Christine Lagarde and other investors said, cryptocurrency is the financial future, so if banks do not adapt buy updating with blockchain technology or find a new form of cryptocurrency like USC to use then the days for central banks look very dark. Right now banks and cryptocurrency are bumping heads to co-exist, but it’s unclear as the bridge between them will become smaller or if banks will completely fade away.