Since cryptocurrencies became a global phenomenon, an ocean of predictions has been made by crypto enthusiasts about its future, as a parallel to fiat currencies.
Fiat currencies will not be ever replaced by cryptocurrency since there ought to be a primary currency on which the government would collect taxes. Instead of questioning the capabilities of cryptocurrency in altering the traditional financial system, we may seek its possibilities in various other sectors such as banking.
Cryptocurrencies might not end capitalism or teach the follies of traditional currency but they might act as an important supportive tool in the banking sector.
In this article, we lookout for a different take on the predictions about cryptocurrencies and their purposes in banking.
Banks are welcoming a new system….
Banks have been planning to establish a new network of transactions between their branches and other banks by using cryptocurrencies. The goal you ask? It is to facilitate smoother operations and also reduce costs.
The cryptocurrency products are expected to take over banks which would be a great change in the mechanism in which banks interact between themselves.
Several banks who are R3 Blockchain Consortium members had agreed to use the virtual cash, referred to as the Utility Settlement Coin (USC) for reducing time consumption. Even other financial corporations were expected to implement a cryptocurrency-based payment system.
Furthermore, many international banks that have branches spread in different countries are required to make transactions with one corporation in local or Fiat currencies. It results in a hassle since companies then have to make a conversion of the transaction according to the regional exchange rates. This particularly requires additional personnel and expensive softwares.
Generally, when transactions between two branches in separate countries have to be made, it is done so in dollars and euros. In this light, the banks understand that adopting a mutual corporate currency would prove to be less expensive.
Many international banks have started to explore their relationships with digital currency. While other banks have started to build backend, blockchain-based infrastructure, and public ledger technology. The obscure sectors of finance like trading loans clearing and settlements might be positively affected going to a secured distributed system.
The number of banks adopting the new digital currency might seem huge although many others are still exploring the idea of a native, decentralized cryptocurrency visit homepage.
If you have some knowledge about the banking system you might as well know that a bank primarily serves as a courier of value and depositary more than for loan applications. Consumers mostly use the banking benefits to store their assets, retrieve those assets and thereby avoid physically carrying those assets with them. Most of the transactions happen through a debit or credit card and in case of traveling abroad through conversion of currency.
It must be highlighted here that all of the above functions can be more stable in a cryptocurrency environment. We also have to assume that this would be possible only when cryptocurrencies would stabilize their prices to a predictable number.
The primary gain
More often than not the traditional banking system is concerned with actual currency rather than digital currency since the latter has not yet been widely accepted. But bank codes create a whole new internal asset with the cryptocurrencies by simply shifting the number of tokens and then selling them off in different currencies.
Adopting cryptocurrencies would also mean that rural customers would be benefited as they do not have to be physically present for banking services since everything happens online with crypto.
Having said all of this, the truth is that it would take many years before banks abandon the fiat currencies and adopt cryptocurrencies or bank tokens. This is usually because modern currencies are still rampant and widely accepted, unlike digital currencies. Try to do your research before investing in some crypto!