How Digital Currencies Will Make An Impact On the Financial Sector?
By Space Coast Daily // June 28, 2022
In the coming years, the financial system is expected to shift. Cryptocurrency is catching up to traditional currency, and the former will soon be supplanted by the latter. Despite all the advantages and disadvantages, institutions have yet to recognize cryptocurrencies as a viable currency option.
They see cryptocurrency as more of risk rather than a potential advantage. However, the OCC (Office of the Comptroller of the Currency) is doing everything to persuade banks and institutions to trust this shift and begin implementing the changes in the new crypto era. Here you can check how to buy digital coins from an exchange platform.
In order to persuade financial bodies, the OCC released instructions instructing them on how to incorporate virtual currencies into their transactional processes. This stride toward virtual currencies, according to the OCC, will assist financial institutions in getting more convenient with crypto assets.
The OCC permitted banks to utilize blockchain as a payment method in January, allowing banks to make transactions significantly faster without the involvement of third parties. Ultimately, the letter instructs financial organizations on how blockchain, like other payment networks, might be integrated into the banking system.
Banks may consider digital currencies risky, and they can be costly to acquire; however, if implemented, they can be highly advantageous for both institutions and clients.
Why Banks Avoiding Cryptocurrency?
As per research performed by ACAMS, 63 percent of the participants in the banking industry believe cryptocurrencies are more of a potential threat than a benefit.
Decentralized in Nature
Tsole goal of introducing Bitcoin was to replace the current traditional currency with virtual currency. Bitcoin was the first cryptocurrency introduced in the crypto market; however, now, there are thousands of other cryptocurrencies to choose from.
Today’s world requires a fresh finance structure system, and cryptocurrencies are widely regarded as the greatest option. Cryptocurrencies are decentralized, which means they are not linked to any banks, government institutions, or other third-party organizations. Instead, all transactions are completed using blockchain technology, eliminating the need for centralized intermediaries.
Scams & Illegal Activities
One primary reason for businesses conducting business operations, particularly in foreign countries, is the slow transaction process and the extra cost charges. This has created some impediments for enterprises, preventing them from extending their operations.
Where traditional payment networks have fallen short, cryptocurrency breaks down boundaries and creates a network that allows for quick transactions with lower transaction fees. And none of this is done with the help of banks, governments, or other financial bodies.
The tracking of payments, unlike banks, is a little different in the cryptocurrency sector due to the use of blockchain technology that supports all transactional processes, not with bank accounts but with transaction IDs.
While cryptocurrency has benefited both businesses and individuals, banks are afraid, considering it may encourage activities like money laundering and the integration of virtual currency into the financial system. As a result, many think cryptocurrency could influence scams and criminal activities.
Volatile Nature
Looking back through history, it is clear that cryptocurrency has always been volatile. It has taken clients on a roller coaster journey with its ups and downs in pricing in a short period of time. There are a number of reasons why the cryptocurrency is so volatile, including its members and market size.
Volatility is risky for banks, and it can cause market pandemonium. Customers would lose trust as a result of this since they want their investments safe at all costs, which is why it is critical for cryptocurrencies to have a constant price in order for banks to accept them as a payment mechanism.
Conclusion
Instead of viewing cryptocurrencies as a rival, banks should embrace cryptocurrency as a sole partner and take initiatives to improve the finance structure.
Some disadvantages are there causing banks to take a step forward, but where bitcoin can provide value, banks adopting cryptocurrencies can result in playing a far larger role in advancing the crypto business. Customers increasingly demand certainty and protection for their funds, which cryptocurrency can give in digital assets with no third-party participation and are significantly more secure due to blockchain.
Accepting cryptocurrency for the betterment of the financial system might be a game-changing move for banks in the coming years.
