Cryptocurrency and the Future of Banks
The cryptocurrency market has been in the headlines ever since bitcoin started to expand beyond horizons and expectations. The sheer rise in wealth followed by tremendous traffic a few months ago has taken the market to new heights.
However, the market has been dropping and tripping as if the sentiments no longer exist. From the $57,000 mark in April 2021 to approximately $36,000 in June 2021, the cryptocurrency market has been tumbling ever since.
Well, there are several prophecies considering the current situation of the market. Some analysts predict that the bitcoin price will cross the $100,000 by the end of the year, creating an epic all-time high.
Indeed, banks and financial institutions have consistently played a significant role in creating a strong base for the market.
Ethereum, a Blockchain technology that has provided services and options for investment banks and management, allows easy transactions and DeFi opportunities.
But some institutions and banks ponder that the Cryptocurrency market is still nascent and needs lots of improvisation.
With this thought, they look somewhere launching their Digital currency, rejecting the idea of an existing cryptocurrency.
They believe that their Digital currency will bring a lot more positive change that will unlock most of the doors for the customers.
What exactly banks are looking forward to? What are the possible reasons for bringing up this idea? Let’s list them!
The Idea of Central Bank Digital Currency (CBDC)
60% of the banks across the world aren’t satisfied with the functionality of the Cryptocurrency market. So they believe in rolling out their digital currency.
This idea was proposed in early January this year, but it didn’t seek much attention since the Crypto market was at its ATH (all-time high) and creating normal beings millionaires. But it has been in the news lately, getting huge traffic and heat.
It was found out in 2019 that 42% of the banks declared that they’re under experimentation and trials of launching their own digital currencies.
14% of the central banks are supervising the pilot programs and temporary agreements to understand the feasibility and the prototype of the proposed idea.
Reasons for the Launch of Own Digital Currency
Banks and financial giants agree that cryptocurrency isn’t much of a better option when it comes to the regulation part. Indeed the system seems robust, but there have been cases of cyber attacks and frauds.
- It motivates the idea of cross-border transfers. With this, it will be easily transferred across countries without levying heavy charges and taxes.
- Bitcoin and other cryptocurrencies don’t work under any authority. They work as a decentralized model that enables a peer-to-peer mode of exchange. Also, the prices change in a blink that either retailers or the locals won’t accept as a norm.
- It’s important to be efficient with the time. By rolling out their digital currency, it will be possible for institutions to control inflation along with implying few regulations. Besides, it enhances the idea of accessibility even at a remote location.
- This financial inclusion will target the underprivileged nations and will help them with better facilities.
Even though the idea is much stronger and gaining lots of attention, only 14% of banks have given the green light to issue their digital currency. 48% are still underway discussion regarding the framework by the government.
Since every bank focuses on stability and accessibility, banks are on the verge of filing an appeal to launch their own set of assets.
Once it’s in the process, the commercial banks will lose their retail deposits, stabilizing the funding source. Hence the central banks are confining the scope of central bank digital currency by regulating a law.
There exist chances of privacy and surveillance, as the government will have the full right to track the money flow using these digital assets.
Facebook Launching Libra
Two years back, Social media giant Facebook, under Zukerberg supervision, proposed the idea of its stablecoin project naming it Libra.
- Libra, the stablecoin, will be pegged by the financial assets that will eliminate the volatility in the prices. Also, it will allow the payments to happen, opening the gates of transactions.
- Post presentation, it received unfavorable verdicts from the authorities and fiscal organizations.
- However, the project was renamed Diem, and it hasn’t been launched yet. Hopefully, the launch is possible in the coming days.
Concluding the Scenario
Ideas keep on evolving the way we work and the way we make payments. From the crypto market to banks launching their Digital assets, the feasibility is increasing day by day.
However, there underlies several grants and clearances to start making their digital currency. Banks are in the race to launch and roll out to stop the dependence on the Cryptocurrency market.
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