Is Cryptocurrency a Threat for the Banks?
There is no doubt in saying that cryptocurrency has brought a revolution in the financial sector around the world, and this revolution has brought a sense of fear among the financial institutions around the world.
If you are wondering what the reason behind this fear is, then we would highly suggest you read our blog post. In the below section of this blog post, we have discussed the reasons; we have provided an in-depth analysis of why banks take these digital currencies as a threat.
But before we jump to the factors, we would like to suggest to you one of the leading crypto exchange platforms named Bitcoin Trader site. This platform can help you to kick start your crypto journey without any hustle.
Common factors that made banks afraid of cryptocurrency
In some studies that various professionals and associations conducted, it has been found that nearly 63% of respondents who work at banks or are related to the banking industry perceive cryptocurrency as a risk and not as an opportunity.
Furthermore, they have also stated different reasons and factors behind this fear of the financial institution reading cryptocurrency. In this section, we have provided an in-depth explanation of all such factors that made banks afraid of cryptocurrency.
The decentralized nature of cryptos
The first and definitely one of the major reasons that made banks afraid of the cryptos is its decentralized nature. Due to its decentralized nature, no financial institution can interfere in the crypto market.
You must know that crypto assets were created as an alternative to the traditional banking system that doesn’t need an intermediary or is bound to any rules or regulations of the centralized government.
And due to this particular restriction regarding interference, the financial institutions think they will have no control over the crypto market, and that is why banks take cryptocurrency as a threat.
Their concerts regarding AML/KYC
The second big factor is that cryptocurrencies allow for peer-to-peer transactions without a regulated intermediary, which gives the user the ability to easily transfer funds without paying any transaction fees. It made the financial institutions afraid of cryptos.
If you wonder why? As peer-to-peer transaction regulates without any intermediary, therefore, the transaction can be made without identifying the legibility of an individual bank account through or taking permission from the banks; transactions are simply linked to the transaction ID on the blockchain. And this aspect has created tension for the financial institutes.
The sole reason is that the banks will not have any transaction details, and they will not be able to provide the information to the government. Along with that, they also fear that it can increase money laundering.
The volatile nature of the crypto market
We all know that the crypto market is volatile in nature. The price of cryptocurrencies, especially bitcoin, has drastically changed over the past few years. Therefore, banks consider it a risk factor because historically, the price has not been stable, so they believe the currency might not remain a stable investment tool over time.
The bottom line
There are various other factors that make banks get afraid or take cryptocurrency as a threat. We have just mentioned the common among the others.