Since the creation of Bitcoin in 2008, the crypto-currency ecosystem has exploded, and its philosophy has changed dramatically. Decentralised finance, known as DeFi, was created as a way for individuals to move their own money without using a third party, which is the role of well-established banks.
Major actors of centralised know that crypto-currencies are not to be dismissed, and the idea that crypto will be a powerful way to move money in the next coming years is slowly sinking in. From the rise of stablecoins to CBCD (central banks’ digital currencies), many examples show that centralised banks want their piece of the cake.
Imagine that you’re a bank that was created almost two centuries ago. You know that your role in society is to keep the customer’s money, invest with it, and dictate your regulations and policies according to your local government. For example, a bank can allow or stop a wire transfer from a customer if they decide that the purpose of this wire transfer is unclear or could contribute to illegal activities.
Now, banks are facing a phenomenon called web3, where an individual can dispose of his money without third parties. It means that traditional banks don’t earn commissions on these transactions. This is a good reason to be fearful about the rise of crypto.
Traditional banking institutions already know that Defi weighs a lot of money, almost a trillion dollars, in 2022. They are eager to find ways to benefit from it, even if it means that the original goal of decentralised finance progressively loses its meaning.
Recently, MasterCard decided to allow its users to use their credit cards to facilitate the buying of cryptos. Although you could already buy crypto with your bank account, big banks frown upon the practice. PayPal is also allowing its users to buy cryptos within the platform. There are many examples of banks willing to ease crypto buying after being wary about it for a whole decade.
Cryptocurrencies simplify an individual’s life with fast and reputably untraceable transactions. Some online markets find it convenient, such as online casinos. Since 2016, bitcoin and Ethereum casinos have been all over the place, and customers are more than eager to check out the best best casino signup bonuses on various websites. Using crypto is faster and more convenient on casino websites because there is no need to show proof of identity or banking information.
Nowadays, you can pay for many things with cryptos on the internet, even if prominent retail actors such as Amazon aren’t up to date with this phenomenon. With more than three thousand cryptos in circulation, the market is constantly expanding, although mentalities take a long time to change and be less doubtful about crypto transactions.
The main characteristic of crypto investing is volatility, as we know that bitcoin and the like can jump from 15,000 $ to 30,000 $ in a matter of weeks. For a long time, centralised banks have considered this volatility as a big issue. To counter that effect, stablecoins have been invented, and these particular tokens follow the value of dollars or euros with great accuracy.
Centralised banks saw in stablecoins a way to enter the market as their value is pretty steady over time. Unfortunately, incidents can happen, and some stablecoins, such as TerraUST, have lost all of their value in 2022, spreading distrust in investors and traditional banks alike.
The case of CBDC (Central Bank Digital Currency) is vastly different because it represents a digital currency that centralised banks (owned by their government) are able to produce and put on the market. Many countries worldwide took a leap of faith and produced their own CBDC, and the results have been positive so far.
For example, the creation of a “digital Euro” is still discussing by the European Central Bank. Even though the road is still long to implement such an innovation, we can see that traditional banking is treading water to offer the public digital money away from traditional cash.
What matters the most to traditional banking actors is a guarantee that this digital money won’t serve for money laundering or illegal activities. Furthermore, they don’t want to offer investment opportunities for products they don’t understand. Regulatory organs such as the SEC (US regulation) have studied crypto for years. Their main goal is to regulate any crypto trading and investing form so that customers and governments don’t lose money on scams and theft.
The actual shape of crypto can seem a bit shady. We are thinking about the fall of FTX, the second crypto platform in the world. There is still a lot of work for centralised banks to adopt digital currencies and give them a legitimate place in the banking world. It will be done by regulation.