The involvement of banks and traditional financial institutions are now becoming more pronounced in the cryptospace, but there is a possibility that their presence will water down the proposed digital currency revolution. Every emerging technology has an underlying extant problem or challenges it seeks to address, and that of digital currencies is not in any way different. With the primary intention to offload the relevance of third parties or middlemen in financial transactions, digital currencies are registering their impact in today’s financial ecosystem.
Just like the advent of emails almost made the services of the post offices to become redundant, so also is the presence of such digital currencies like Bitcoin (BTC), Ethereum (ETH), and XRP amongst and their payment networks posing a threat to the services of banks. With digital currencies, you transfer money, or associated value directly to the recipient without having to rely on the banks. And for a much lower transaction fee. Who wouldn’t appreciate that?
With the realization of the long-term capabilities of these digital currencies, regulators around the world, as well as banks themselves, are trying to reposition themselves so that banks can tag along, a move that is questionable considering the fundamentals of digital currencies and their associated blockchain networks.
Using the United States of America as a reference, National Banks now have relatively easier access to get involved in crypto. As reported by Cryptoknowmics back in July, the leverage banks now have to keep custody of cryptocurrencies follows the directions from the U.S. Office of the Comptroller of the Currency (OCC).
“The OCC recognizes that, as the financial markets become increasingly technological, there will likely be increasing need for banks and other service providers to leverage new technology and innovative ways to provide traditional services on behalf of customers,” The OCC said in a statement at the time.
However, experts in the space believe this is a decoy by the banking watchdog to encroach into the digital currency space. The belief is that if cryptocurrency holders who keep custody of their digital currencies with the banks will still be bound by the banking policies as it would have been should cash have been saved with the bank.
Roger Ver, one of the earliest investors in the space weighed in on the matter in a tweet over the weekend. Per his words;
“If you have to put your cryptocurrency in a bank to use it - even if you call the bank a "hub" and your account a "channel" - it's no longer disruptive or empowering.”
His position is glaring, the presence of banks in crypto removes the autonomy that crypto traders will enjoy as every transaction will still be monitored, and the independence eroded.
For over a decade, a limited part of the world has enjoyed the presence of Bitcoin and altcoins, either as a unique investment asset class or as a currency for completing payments. Over time, Central Banks around the world have tried to suppress the dominance of these digital assets with strict regulations, and while that did not work, a new attempt to develop Central Bank-backed Digital Currencies (CBDCs) is beginning to gain traction.
While the fact that only a few countries are in the advanced stages of this CBDC development, it is hard to tell what position these nations might take against Bitcoin and Altcoins in the longer term when their CBDCs are fully in circulation. Nonetheless, the move to roll out CBDCs might be another ingenious endgame to retake control of the financial ecosystem that digital currencies are currently determined to take from banks.