As Crypto Adoption Gathers Momentum, Big Banks Fight On

The rise of crypto is a challenge to the dominance of big banks in the international money transfer market. Daily settlement of accounts using crypto has surged with implications for banking liquidity.

The surge of crypto reached its zenith in 2017 with record pricing that could not be ignored. And by 2018, it had hit the corners of the globe like a big bang. The immediate effect of the popularity of cryptocurrency was loss of business by mainstream banks. It was not long after this shift that various attacks were launched against crypto on all sides.

After the price meltdown of 2018, banks and their cheerleaders were in a hurry to lampoon tokens and coins. One year after the price tank witnessed in the cryptocurrency sector, the market still stands. Bitcoin, XRP, Ethereum and the other wave-makers still stick out like a sore thumb that cannot be hide.

Noticeable developments were recorded on the bitcoin scene over the past year with pseudo-inventors and other developers leading the leap. Bitcoin lightning network was perhaps the biggest headliner as it emerged to give the chance of bitcoin adoption a lift. Using Bitcoin lightning network essentially makes it possible for faster transaction processing. It also obviates the concerns of merchants looking forward to better value recognition times.

Fighting the Tide

The actions and reports from the banking giants around the globe in 2018 pointed to the overwhelming distaste of crypto. However, market watchers and other chroniclers of the tech age have averred that the old ways of banking were set for extinction. In this regard, one needed to look at the mainstream adoption of blockchain spearheaded by the likes of IBM and even JPMorgan in one form or the other.

While IBM worked with developers exploring the use of blockchain in more areas of daily life, other big names were aloof.  JP Morgan was developing its crypto under cover and took the world by surprise when it launched its JPM coin.

Facebook also took the route outside the headlines by headhunting blockchain experts without much ado. Now, it is becoming clear that something big is the wings of the social media giants. In all certainty, while governments dillydallied over the steps to take on crypto, the big corporations could not look the other way. Many corporations have over the past year mooted or taken steps to explore applications of blockchain for business.

Factors Affecting Cryptocurrency

Like every new invention or technology, cryptocurrencies have had a fair share of flakes from many spheres. One of the biggest downsides so far is the price volatility. Essentially, no big business will be willing to stake on anything that is so volatile with no possible hedge. Price movements for many tokens and coins are largely unpredictable. This gives cause for concern, and the big banks have been quick to latch in on this.

Since, cryptocurrencies are nascent, it is expected that getting things right will take some time. In the same vein, government agencies have also taken steps to fashion out how to marshal its corporate governance. All these point out that the loopholes of crypto are evident, and steps needed to be taken to obviate them.

The Threat to Banks

One of the biggest threats to traditional banking by cryptocurrencies is the aspect of money and value transfer. Several people around the world who are social media-savvy have seen the possibilities of instant payments in crypto. For example, dogecoin has been used for years a social media tip enabler. This made it possible for national and currency walls to be easily broken.

Ripple XRP records millions of dollars in daily transfers around the globe, and a transaction is completed in a matter of seconds. Compared with SWIFT and other bank wire transfers that take days to consummate, XRP became the preferred alternative. It is also worth noting that while XRP takes a few cents in cost, traditional wire transfers set you back by a few dollars.

It is not for nothing then that many people could see that banks hate cryptocurrency. This is not out of concern for the user, but for a fight of market share. In every rational circumstance, it is expected that faced with two options, you will settle for the least-cost, and most effective alternative. This has been the case with the global money transfer scenario.

It should also be noted that the use of digital wallets in crypto transactions also confers ease in global payments. Even for local value transfer, having a public address, a private key, and Internet access makes crypto payments easy. Value can be transferred and recognized in a few minutes with crypto payments and the rave caught on fast in many countries.

So, banks in no doubt, began to record reduced transaction volumes as well as movement in fiat to crypto. Since funds movement can easily be traced, it is evident that many banks saw a shift toward coins and tokens that deprived them of transactional income.

In the case of JPM, having seen the shift to crypto across the globe, it innovated. By birthing its native stablecoin, JPM might win a share of the new world of crypto.  This move by JPM could be a signpost going forward- as they say, “if you can’t beat them, join them.”

Cryptocurrency Exchanges

Top 10 cryptocurrency exchange by market volume by coinmarketcap

The practice among the best cryptocurrency exchanges is to spread their coins and tokens as a risk management tool. Stablecoins hardly change in value like fiat, and knowing this, a percentage of exchanges’ liquidity is stored thereon. Somehow, the liquidity erstwhile held by traditional banks is now in the kitty of crypto exchanges. A part or all of coins and tokens held in digital wallets could have been siting in bank vaults.

Last Words

The emergence of crypto exchanges has taken a slice off the liquidity of banks around the globe. Instead of whining, some banks have transited into crypto storage and custodian services. By so doing, these proactive banks might have seen that the fight against crypto cannot be won.

In the years to come, regulation will take shape, and the world would have moved closer to the reign of digital currencies.

About Stevan Mcgrath,

Stevan Mcgrath, is a Bitcoin and cryptocurrency enthusiast, passionate about the potential these tools and blockchain technology bring to the world and writes consistently for CoinReview. He has been following development of blockchain for several years. To know his work and more details you can follow him on Twitter, Linkedin.