Will Banking be Able to Regulate Cryptocurrency?
The institution of banking has traditionally been the regulatory body that has overseen the economy of a country. Its role solidified further with the introduction of paper money as official currency. Now, with the entry of cryptocurrency in the economy – where do banks stand with it?
Cryptocurrency was devised to improve upon the flaws in traditional currency. When Bitcoin was minted first in 2009, it was done in response to the economic crisis of 2008 as a viable alternative to the existing banking system.
How Banks Responded to Cryptocurrency in the Heydays
When cryptocurrency was first introduced, the banking sector refused to give it any importance as they expected it to fizzle out. But it didn’t. It grew in popularity and is now a safer currency alternative to traditional currency. Many cryptocurrencies have developed since Bitcoin and registered a growth in value. Banks around the world have now woken up to the disruptive power of cryptocurrency, reacting differently in different parts of the world. Certain countries like China have clamped down on crypto-exchange operations while others have been quite receptive as has the Netherlands and other Nordic countries.
How Can Banking Regulate Cryptocurrency?
Prima facie, banks have little space to regulate the minting or trade operations of cryptocurrency. Why? Cryptocurrency is based on a decentralized system where individuals can transact amongst themselves without involving a third party. Secondly, it is highly volatile and so is unlikely to replace flat money anytime soon. Of course, the market value of the regular currency is subject to ups and downs as well, but these aren’t as sharp as with crypto. Naturally, if cryptocurrency is to become the primary currency in our society – banks will have little role to play as they will be helpless in the face of such volatility.
All hope isn’t lost though. If the banking system was to modernize itself by adopting blockchain technology, it could function the same way a crypto exchange does.
Additionally, if cryptocurrencies became more media-reliant than simply value-reliant, banks would find it easier to deal with them.
It is too soon to rule out the bank’s role in a world dominated by cryptocurrency. At the same time, traditional banking as we have known it may be looking ahead to a decline. Nations, now, should probably mull the idea of introducing cryptocurrency for official monetary exchange to draw it into the folds of the banking system.
Gedi is passionate about fast cars, video production, travels and the Internet. He has years of experience working as User Interface Engineer with a demonstrated history of working in the information services industry. Skilled in Web Applications, NodeJS, React, Redux and UI. Growing interest in Bitcoin and cryptocurrencies, he joined TheDailyCoins as a writer.