Traditional Financial Systems all around the globe are among the most significant critics of cryptocurrencies, amid the emerging possibility that cryptocurrencies can steal a massive amount of market share from banks in the days to come. Cryptocurrencies don’t require any intermediation for processing the transaction; this phenomenon allows digital currencies to complete the transaction in less time with lower cost when compared to banks.
Head of State Bank of India said; “By 2030, traditional banking services could cease to exist with Blockchain. Blockchain can replace all services of banks.”
Though banks are rapidly testing and adopting blockchain technologies to advance their payment systems and lower their costs, the majority of banks are suggesting their clients avoid trading cryptocurrencies and stick to regular financial systems.
For instance, several banks and payments services companies are showing their confidence in Ripple’s (XRP) blockchain technology. Indeed, the Saudi Central Bank has also announced its partnership with ripple to strengthen its cross-border and internal payment system.
Banks Consider Cryptocurrencies as Risk Factor For Regular Financial Systems
Bank of America, who recently announced their annual report, believes that cryptocurrencies could have the potential to expand their market share in the financial sector and impede on traditional financial systems.
J.P. Morgan Chase has changed their stance several times on cryptocurrencies after calling them fraudulent; the bank now consider digital currencies amongst the biggest risk factors for their business.
“Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies such cryptocurrencies, that require no intermediation,” JP Morgan wrote in their recent report.
But Cryptocurrencies Need to Address Several Factors
The Bank of England’s governor said virtual currencies fail to work as a currency and medium of exchange. The governor’s comments are indeed correct. Cryptocurrencies have gained a lot of popularity in the last few quarters, but the considerable volatility in their prices continues to impact their position as a currency and medium of exchange. However, regulatory actions could be beneficial in stabilizing digital currencies – which could then increase their potential to snatch the market share from banks.
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