With the advent of the decentralized systems and cryptocurrencies, one thing became apparent to the entire world. There is a possibility that in the future banks might not be needed anymore. But as time passed, various issues were brought to attention all of which rooted from the fact that it was harder to put trust into something new and unpredictable. Bitcoin(BTC) was created after the market crash of 2008. It was a solution to the problems created by using the Fiat currencies. People sought a replacement because of lost of trust in the centralized currencies and central authorities.
But for masses to truly embrace cryptocurrencies was not as easy because of a number of reasons. First and foremost being, its highly volatile nature. One day the prices are touching the sky, the next they are deep into the ground. The uncertainty associated with them is what has caused people to refrain from investing into crypto. Secondly, there have been a lot of scams in this space. A lot of fraudulent activities, making it to headlines that not only tainted the image of cryptocurrencies but also significantly cut down their popularity. Additionally, There have been multiple accounts of crypto being hacked out of people’s possessions causing them huge losses. Thirdly, lack of a regulatory framework and the governments hesitancy to provide any kind of rules and regulations for the trade of cryptocurrencies has created a lot of barriers for mainstream adoption.
It has been more than a decade since Bitcoin was first introduced and the technology has evolved. More secure platforms are being introduced through which people can safeguard their digital assets. The market is still as volatile as it has ever been, but the governments are looking into drawing up legal framework for cryptocurrencies. No one could foresee the progress the technology has made so far. Some analysts even believe that cryptocurrencies might actually replace the fiat because of the advantages it provides. Amidst all this, one question that pops into the mind is that, what purpose would the banks fulfill if cryptocurrencies get adopted in place of the fiat?
Banks represent the centralized system whereas cryptocurrencies are decentralized, meaning all transactions are carried in an independent manner, without the intrusion of the middle man. The elimination of middleman might not bode well for the banking systems nor for any other corporation that run on a centralized systems. So does it mean that the Banks need to pack up and leave?
Bitcoins underlying technology, Blockchain, is what made it so distinctive, and blockchain has a myriad of applications. What the banks and other centralized institutions need to do is to adapt to changing trends. The centralized infrastructure can be taken apart and be replaced with a decentralized one with the help of blockchain. But the change needs to be a gradual one, as crypto is nowhere near getting adopted globally as a means of payment. Keeping up with the changing crypto trends and making subtle changes along the way might just ensure their survival and safeguard their role and position in the future.
There have been few instances, where banks have taken initiative to form their own digital currencies, but those are not decentralized rather they are known as the digital fiat currencies. According to 2018 BIS survey of central banks over 70% of central banks are studying central bank digital currencies. It was also assessed that 25% central banks have or will soon in the near future authority to issue central bank digital currencies.
In a nutshell, to date, cryptocurrencies have not been regulated, but it is a possibility in the near future. If that development does take place, a mass adoption of cryptocurrencies might be a possibility too which would eliminate the need for the traditional banking system and would create new opportunities for the crypto exchanges instead.