Over a decade ago, Bitcoin gained popularity worldwide. I think it’s important to note that today, Bitcoin has achieved a position as the most well known cryptocurrency in the market.
Over the years, blockchain has become known as the technology that brought Bitcoin to life.
Advocates of cryptocurrencies often claim the main advantages over traditional banking systems: they are fast, and they are cheap – this mirrors the capitalistic society where people are drawn to efficient and reliable services at a low-cost.
When international businesses are faced with a choice between waiting 24 hours or more for a wire transfer or paying huge fees for express transactions, Bitcoin sure does sound like a good alternative.
So let’s see how far banks and crypto differ.
Traditional Money vs CryptoCurrency
So let’s start by distinguishing traditional money and crypto. To put it into perspective, the main difference between traditional money and cryptocurrency is that crypto is a decentralized and often global digital currency.
This also means that it is independent from the control of any government. As a result, many people prefer using cryptocurrency as they gain more control over their transactions.
Advantages of Decentralized Financial System
The main advantage of cryptocurrency is the ability to function independently. Most of the cryptos are based on P2P settlement systems and are fully operational at any given moment in time.
Due to its independent system, cryptocurrencies offer businesses and individuals many advantages wherein government entities often control banks and financial institutions.
Another advantage of a decentralized financial system is its ability to offer affordable cross-border payments. Decentralized finance removes costly transaction rates, allowing individuals and businesses to conduct transactions in a span of minutes! This makes it more affordable for the global population.
In the current system, it is evidently costly to send money across borders. Through decentralized financial systems, transaction rates are way below what regular banks and other traditional financial institutions charge.
Regulations: Empowering or Restricting Crypto?
As mentioned previously, cryptocurrencies exist as independent entities not controlled by the government. The lack of regulation means that it also poses potential problems in some areas.
The transaction rates are certainly lower – there is no need for a middle entity to control your transactions. It is also available anytime beyond regular office hours.
Recently however, regulators seem to be catching up on crypto as in the case display of Cryptoverse. The rise of such regulations can be seen as an attempt at oversight, breaches the fundamentals of crypto – an independent and workable system that exists without being controlled by a third party.
Another way of seeing it is in more of a positive light though. For example, it can be taken as an opportunity to bridge the gap between traditional money and cryptocurrencies, revolutionizing the entire global financial system.
With new regulations emerging on a regular basis, it will take some time for the effects to show whether there will be a markedly positive or negative impact.
Merging Banking and Crypto?
It has become evident that cryptocurrencies will have to adapt to certain regulations with banks having to also shift their priorities to mirror new regulations.
Some of the traditional roles of banking have to be scrapped to increase customer’s convenience. This also brings about a question regarding the offshore banking industry and what this means for cryptocurrencies.
The offshore banking industry is dominated by financial institutions like JP Morgan and is structured around larger banks that are able to clear big sums of money in an efficient and transparent manner.
However, the transactions usually require manual labor to process and procure. As a result, the process is often delayed as there are many external factors involved.
In regards to transaction rates, offshore banking, financial freedom, centralized system of banks fall behind major cryptocurrencies, which can offer all of these services in a more efficient and cost-effective manner.
Besides, cryptocurrencies like Bitcoin and Ehtereum have significant advantages over banks such as its low transaction rates, borderless transaction system, and lack of dependence on centralized systems of banks.
This makes it easier for many individuals and businesses to make and receive transactions as opposed to traditional banking systems.
Mobile phones have also changed consumer behavior and the way people view the Internet. It has become a revolutionary force in society today, with China and India currently having one of the highest Fintech adoption rates.
When clearly distinguishing banks and cryptocurrencies, there are no real winners in the market at the moment. Crypto definitely has the edge in transaction fees and limited oversight – but the latter is a doubled edged sword.
Still, with low-cost transaction rates, easy borderless transaction system, and efficient payment clearance, all of these factors contribute greatly to the overwhelming success of cryptocurrencies.
Regardless of the different cryptocurrencies, you are looking for, none of the current top options are likely to disappear anytime soon.