Why Should Banks Embrace Cryptocurrencies?

17 Oct

The jury is still out on cryptocurrency. From the first few years following the inception of Bitcoin, banks had little to say about cryptocoins or anything about them. More recently, though, as cryptocurrencies have begun to regularly dominate the news program and have become of interest to a far wider consumer market, banks have been required to choose where they stand.

The dangers connected with cryptocurrencies are well documented. Their dramatic volatility is the thing that sets cryptocurrencies apart from any other currency or asset within an investment. As volatility is just one of the principal risks for banks, so it's understandable why many aren't allowing their customers to use credit cards to buy cryptocurrencies in the expectation their investment could appreciate value. The danger of the banks would be that if their clients were to observe a drop in the value of their currency, they might be unable to pay the bank back for the credit or for loans that are outstanding.

Banks are also citing security as another reason for their reluctance to adopt cryptocurrencies. Since cryptocurrencies have gone mainstream, there's been a string of high-profile instances where customers have lost their money in widespread hacking attacks. Other allegations have promised that the anonymity that cryptocurrencies manage the consumer is facilitating their involvement in money laundering and deceptive tactics.

It is easy to see why banks are reluctant to adopt cryptocurrencies with such a lot of potential challenges but there's a potential remedy to such sorts of issues: regulation. Last month the UK's Treasury Committee described the crypto-landscape because wild West' in desperate need of law, but also implied that these regulations could position the UK as a hub for cryptocurrency development and trading. The legislation would remedy lots of the issues that banks are facing, encouraging the secure evolution of the crypto-space into the mutual advantage of consumers and institutions.

Cyber-attacks, where consumers have lost currency, have occurred when capital is now held by centralized trades, perhaps not by the respective owners. The imposition of legislation about cryptocurrency storage is likely to promote education among crypto-owners concerning the quickest and a safest securest way to store digital assets.

Actually, the technology which underpins cryptocurrencies, the blockchain, is extremely valuable to banks in its own immutable and interoperable character. It's one of the most stable technologies that has been developed which means it can be hugely helpful in preventing money laundering and fraud. Every instance of transferred funds is recorded on the blockchain, which means that, essentially, a flow of money may be tracked at any given stage, making it quite difficult for criminals to use cryptocurrencies as a way of laundering dirty money. With supporting legislation and regulation to make certain cryptocurrency owners continue to be monitored in precisely the exact same manner as regular advantage owners, blockchain-based currencies could eventually have a deep effect in lessening the achievement of organized fraud.

There's not any straightforward answer to whether banks need to be more embracive towards cryptocurrencies. There are potential dangers just because there are potential advantages, and the fact is they just haven't been around long enough for people to understand them fully. As a sector dominated by old and conventional associations, the finance sector would be erroneous to stifle invention by rejecting cryptocurrencies, but it will need safeguards in place. The potential of the fund should certainly involve cryptocurrencies, but for them to be really valuable they need to be controlled like any other kind of asset.

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