Banking institutions remain divided on embracing or banning Bitcoin. Here’s why banks should embrace Bitcoin.
Crypto continues to elicit mixed reactions, with some campaigning for their adoption and others insisting they should be banned. Many economic sectors have adopted Bitcoin for daily transactions and as an investment instrument. Bitcoin boasts millions of users worldwide, including institutional investors, merchants, and individuals. However, adoption remains relatively low among mainstream banking institutions.
Several global banks still lack a clear stance on embracing or banning Bitcoin. Only the People’s Bank of China has banned crypto. Instead of Bitcoin, the PBoC has its crypto, exclusively accessible on Bitcoin Era. However, their actions also show support for Bitcoin and other cryptocurrencies. So, should banks embrace or ban Bitcoin? The following article explores Bitcoin’s potential impacts on the banking sector.
Boosting Service Delivery
Banks provide a wide range of financial services, including accounts opening and maintenance, money transfers, and custodian services. However, their operations remain subject to government regulations, hindering service delivery significantly. For instance, international money transfers usually take several hours or days to complete. The services also cost a lot of money, mainly due to the multiple players involved.
Embracing Bitcoin would enable banks to solve some of the inconsistencies that have held them back for decades. For example, Bitcoin could allow the banking sector to improve service delivery by expediting cross-border payments promptly. Bitcoin transactions are not subject to government regulations, facilitating the speedy processing of cross-border payments.
Instead of intermediaries, Bitcoin’s blockchain technology verifies and validates all transactions virtually. That ensures rapid payment processing and low transaction costs to customers. Besides, banks can also provide Bitcoin wallets and custodian services to crypto users, boosting their service delivery to customers and profitability.
No Central Authority
Some banks are skeptical about embracing Bitcoin and other cryptocurrencies because it has no central entity to regulate them. According to them, integrating Bitcoin would undermine the banks’ role as the primary financial custodians. They are unhappy that embracing Bitcoin could potentially damage their authority in financial transactions.
Unlike fiat currencies, whose transactions must go through the banks, Bitcoin allows its users to bypass those hurdles. Bitcoin operates on a peer-to-peer network without any external oversight. And, that is why some banks are afraid Bitcoin would undermine their authority as the financial gatekeepers.
Rapid Expansion into Emerging Global Markets
Bitcoin has gained a significant foothold in major global economic sectors, including finance, manufacturing, retail, real estate, and travel. Many businesses around the world have adopted Bitcoin as a payment system. Bitcoin has also inspired a rapidly growing market of global consumers seeking crypto-friendly companies to transact with it.
Several multinational organizations and institutional investors currently hold vast amounts of Bitcoin. Bitcoin’s solid standing as a currency for daily transactions and an asset makes it entrenched in the global economy. Thus, large financial institutions have no choice but to embrace it. Bitcoin’s widespread adoption offers banks more significant expansion opportunities with fewer risks.
Banks that embrace Bitcoin will easily attract global customers due to the increasing number of businesses and individuals willing to use it to pay for goods and services and invest worldwide.
Bitcoin has sparked robust innovations beyond just finance. For instance, many financial institutions are developing blockchain apps to handle the next generation’s assets transfers, trade settlements, title transfers, digital ownerships, smart contracts, and asset management services. Those innovations will enable banking companies to cut operational costs and boost efficiency.
Overall, Bitcoin impacts the banking industry in various ways that some banks may see as threatening. However, it also has an immense potential to revolutionize service delivery and spark critical innovations across the entire global banking sector. Thus, banks should embrace Bitcoin.
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